By Andrew Wilding, Managing Director, Asdem Limited
This case concerned the basis of Glencore’s claim against OMV under a CFR contract for waiting time outside the port. The vessel was chartered in by ST Shipping. Under a Frame Agreement between Glencore and ST, Glencore informs ST Shipping that it requires a vessel for a particular trade. ST Shipping then seeks to provide vessels from ST Shipping’s own fleet or by chartering them in. Once the vessel, Sea Grace, had been chartered for this sale by ST they dropped out of the picture and Glencore Energy took over the handling of day to day operations and the provision of instructions to the vessel.
OMV asked Glencore to instruct the vessel to wait because a berth was not available to discharge. When OMV provided its instructions to wait, they asked for
The vessel owners informed Glencore that bunkers consumed “over idle during waiting” were for charterers account. As far as we can tell from the law report OMV were not so informed but it seems that the fact that owners stated this as regards the charterparty, may have influenced the judge in his consideration of the position under the sale and purchase contract. The next day the vessel arrived at the waiting area tendered NOR and dropped anchor. The vessel eventually entered the discharge port of Trieste after 3 weeks waiting and tendered another NOR without prejudice to the first NOR tendered when the vessel arrived at the waiting area.
On 30 November the vessel owners requested a payment on account under the charterparty from Glencore due to the length of waiting time. A payment was made on account of demurrage. On 22nd December the vessel owners invoiced Glencore for “balance demurrage”.
Glencore made no claim against OMV for the waiting time. When the time bar passed OMV told Glencore that no claim could be made against them. There was inevitably a reaction to this news. Firstly, the vessel owners invoiced Glencore for a claim for detention for the waiting time plus the cost of bunkers consumed under their BPVOY 4 charter with ST Shipping/Glencore. Clause 22.2.3 of BPVOY in its unamended form provides that
“[If] the Vessel is, after loading, instructed by Owners to stop and await orders at Charterers’ request then all time spent by the Vessel awaiting orders shall count as laytime or, if the Vessel is on demurrage, as demurrage.”
It was quite possibly a claim for demurrage wrongly labelled as a claim for detention. In any event claims for either demurrage or detention are time barred after 90 Days under BPVOY 4. Such considerations may well have influenced OMVs commercial position towards the claim they faced in light of what might have been a time barred claim Glencore/ST in turn apparently faced from owners. However, such considerations were irrelevant to the contractual claims under OMV’s sale and purchase contract with Glencore and the implied contract they had made.
Glencore issued an invoice to OMV for detention under the CFR sales contract - time waiting at the demurrage rate plus bunkers consumed at anchor. No time bar attached to such claims under the sales contract. OMV said it was a claim for demurrage – to which a time bar applied - because there had been an agreed variation of the contract and the start of laytime was advanced to the waiting area. After examining, somewhat technically, the impact such a variation would have on the laytime and demurrage regime in the contract the judge felt that this position was unworkable.
The judge held there was an implied contract for “delay by agreement” because OMVs order to wait OPL was outside the four corners of the contract. This gave rise to an implied contract that the vessel would wait in the specified waiting area until further orders, and Glencore would be remunerated for that service. The Judge held that the demurrage rate became the implied contractual benchmark for quantification of Glencore’s claim for providing the services of the vessel in the waiting area. It was the fair commercial rate and met the standard of reasonableness for the service Glencore provided.
OMV’s requests for bunker records persuaded the judge that it was also an implied term that OMV would pay for the bunkers consumed as a result of the vessel having to wait at the waiting area. The judge stated, “Why else should OMV request that bunker records be kept, except that a reasonable person knowledgeable about this trade would expect that a claim for bunkers would follow the request for the vessel to wait?”. Unfortunately, no one from OMV was present to answer this question. There are many reasons why a charterer would not to know what the bunkers the vessel had on board. To imply a term on the basis of speculation may seem harsh.
There are interesting aspects to this judgement. Delay by agreement is a well-established principle (See Greenmast Shipping Co. S.A. v. Jean Lion et Cie S.A. (The "Saronikos")  Vol. 2 LR. 277.) but may not be widely known to operators of sale and purchase contracts. (NOTE: Most modern voyage charterparty forms permit the charterers to ask the vessel to wait and the terms which apply when they do so.) If an implied contract does arise it is important that the parties are aware of this and clarify the terms on which it is made or consider whether waiting by agreement is (or should be) covered in their contracts.
Owners said that they would make a claim for bunkers “over idle” against ST/Glencore. Idling refers to running a vessels engine when the vessel is not in motion. This commonly occurs when a vessel is stopped at a pilot station at a drifting area, waiting while anchored, or otherwise stationary with the engine running. When idling, the engine runs without any load to propel the vessel but may be used to generate electricity for the ships auxiliary systems. It is widely accepted in the industry that the demurrage rate includes the cost of bunkers consumed at anchor to power auxiliary machinery or equipment. See The Nikmary (First Instance)  EWHC 46; Schofield on Laytime and Demurrage 7th Edition; Worldscale Table C (which expressly states that the Demurrage rates include an allowance for such bunkers). Waiting time at anchor was claimed at the demurrage rate. There is no discussion of that rate including bunkers in the judgement. Further there is no indication of what bunkers were claimed whether it was only certain consumption over idle or all bunker consumption.
By Andrew Wilding, Managing Director, Asdem Limited
Understanding the breakdown exception and how it applies begins with the unreported case of Olbena S.A. v. Psara Maritime Inc., (The Thanassis A) . This case involved the destruction of a jetty which the court said was to be distinguished from a breakdown. Following The Thanassis A came the Court of Appeal’s judgement in The "AFRAPEARL"  EWCACiv 864. This case concerned the M'Bao Sealine berth in Senegal. In the 12 months preceding the breakdown in question, there were 3 incidents (i.e. breakdowns) involving serious leaks from the same part of the pipeline. The effectiveness of the repairs was questionable. Sometimes no repairs were undertaken. The sealine appeared to be leaking oil before the vessel arrived. There was oil on the surface of the water giving rise to complaints by local residents, and it was seen by the Master of The Afrapearl as the vessel approached the berth. The Loading Master also admitted the sealine was leaking but nevertheless considered that it was possible to discharge the vessel. However, discharging was suspended after only 15 minutes due to the unacceptable extent of the leak that now occurred. The Afrapearl was kept waiting almost 3 weeks and discharged when the defective part of the line was replaced. The Court of Appeal recognised that the pipeline was damaged and neglected, and unrepaired but that it had nevertheless been used and functioned as a pipeline in the 6 months prior to the arrival of The Afrapearl. Sometimes the pipeline worked. Sometimes the pipeline prevented any discharge because of unacceptable amount of leakage and pollution such that the pipeline could not and did not function/work as a pipeline. On such occasions it broke down. This investigation led the court to conclude there was a series of separate breakdowns one of which occurred when The Afrapearl called at the berth to discharge.
The Afrapearl has led many charterers to conclude that you simply have to establish that a piece of equipment or machinery is not working/functioning and caused a loss of time and that once you have done so the “breakdown in machinery or equipment” exception “automatically” applies. Such thinking is understandable. However, it is incorrect for the reasons that follow.
It is necessary to consider whether there is a “breakdown” or a “malfunction” by reference to the facts of the particular case and the particular charter-party clause. Like any provision of a contract the clause must be considered in the context of the contract as a whole, which in turn must be viewed against its factual matrix or surrounding circumstances of the breakdown. The case of The Ladytramp  EWCACiv 1449 provides a good illustration of the correct approach. The charterers submitted that a conveyor belt which was not able to operate had broken down and stated that the 50% exception applied. The court found it was an exception for “mechanical breakdowns…” and did not apply to delay caused by a fire and that fire was the cause of the conveyor belt not working. It was not a mechanical cause.
Whilst we do not know the exact facts relating to the reduced discharge rates at the facility in question we understand that part of the discharging machinery/equipment has broken down. This is causing delays. However, the facility is still operational and functioning albeit more slowly. It is our view, always depending on the wording of the clause in question, a simple exception for “breakdown machinery equipment” would not apply. The pipeline still operates, but more slowly. There was a pre-existing problem which was known and was inevitably going to lead to delays and in such circumstances an inevitable loss of time such that, in our opinion, the breakdown exception will not apply. There is clear support for this position as a principle of English case law in a line of authority that runs through The Vancouver Strikes Cases , The Angelia , The Afrapearl (supra) and The Ladytramp (supra).
We would emphasise that it all depends on the wording of the exception. Principles must be applied to clauses and facts. As with any exception, the clause in question must be examined carefully.
By Andrew Wilding, Managing Director, Asdem Limited
In the recent case of SEATRADE GROUP N.V. v. HAKANAGROD.M.C.C  EWHC 654 (Comm) (The Aconcagua Bay) the voyage charter provided that the loading place was always accessible. Whilst the Vessel was loading a bridge and lock were damaged. As a result, the Vessel was unable to use the channel and leave the berth for 14 days. The Owners claimed damages for detention from the Charterers for the period of delay. The question of law that this case considered is whether the warranty in a voyage charterparty that a berth is “always accessible” means that the vessel is always able not only to enter but also to leave the berth.
The expressions that a berth is “always accessible” or “always available” (generally found in dry charterparties) or “reachable on arrival” (generally found in tanker charterparties) have been treated as having the same meaning such that
“[the charterer warrants] that the vessel may proceed into the designated berth without delay and without risk immediately upon her arrival even though any obstacle is temporary and can be avoided by waiting”.
This conclusion is in line with The President Brand  - "Reachable" as a matter of grammar means "able to be reached". If the berth could not be reached the charterers commitment to provide a reachable berth was broken. This was the approach followed in The Kyzikos  at first instance (heard May 19/20, and July 30, 1986) when considering the expression “always accessible”:
“I think it right to treat [an always accessible provision] as synonymous [with the expression reachable on arrival.]”
In The Kyzikos it was held that "accessible" meant "capable of being approached" such that a vessel has an “unobstructed way or means of approach”. Confusingly the court restricted the application of this undertaking to something physically obstructing the approach to the berth. A berth is, therefore, not always accessible when it does not have an unobstructed way or means of approach from a physical perspective. If the berth was vacant but fog or other weather conditions prevented the vessel from safely approaching, the berth itself nevertheless remained “always accessible”. The fact that the berth could not be safely approached did not breach the warranty. The vessel could get into the berth it just could not reach it. The Kyzioks eventually went to the House of Lords in June 1988. The House of Lords judgement did not directly address these issues.
In contrast in oil charterparties containing a ‘‘reachable on arrival’’ provision in The Sea Queen  (heard 6 November 1987) it was held that a delay in berthing caused by unavailability of tugs followed by bad weather placed charterers in breach of a reachable on arrival provision. There was a breach whatever the reason the berth was not reachable. In The Fjordaas  (heard 6 days later on 12 November 1987) the vessel was unable to proceed because of a restriction on night navigation and compulsory pilotage which was not available until daylight. In considering whether reachable was limited to congestion the court was not prepared to put any limitation on the provision and adopting the test In The President Brand  - "Reachable" means "able to be reached". If the berth could not be reached the charterers warranty that it was reachable was broken.
This trio of decisions has been the cause of controversy. It has been suggested that there is no reason to distinguish between the causes of delay and that The Fjordaas and The Sea Queen decisions are the ones that should be followed in relation to ‘‘always accessible’’. Therefore, to differentiate “accessibility” from “reachability” might seem artificial when considering access to or reaching the berth.
Against this background the construction of the phrase “always accessible” came before Mr Justice Knowles. Instinctively and commercial shipping sense suggests to us, that if you are considering a clause concerned with access to a loading place, owners and charterers are contemplating gaining access to load – this is how the courts and leading textbooks such as Voyage Charters have interpreted the phrase. “always accessible” does not mean the same as “always leavable”.
However, in a short judgement Mr Justice Knowles held that the phrase “Always Accessible” means that a vessel is always able not only to enter but also to leave the berth. The judge appeared (understandably) to be strongly influenced by both The Baltic Code which states that:
REACHABLE ON HER ARRIVAL or ALWAYS ACCESSIBLE
Means that the charterer undertakes that an available and accessible loading or discharging berth will be provided to the vessel on her arrival at or off the port which she can reach safely without delay proceeding normally. Where the charterer undertakes the berth will be ALWAYS ACCESSIBLE, the charterer additionally undertakes that the vessel will be able to arrive and depart safely from the berth without delay at any time before, during or on completion of loading or discharging.
and BIMCO’s Laytime Definitions for Charterparties 2013 which were amended to state that:
ALWAYS ACCESSIBLE shall mean that the charterer undertakes that an available loading or discharging Berth be provided to the Vessel on arrival at the Port which the Vessel can reach safely without delay. The charterer additionally undertakes that the Vessel will be able to depart safely from the Berth and without delay at any time before, during or on completion of loading or discharging.
The laytime and demurrage industry now has a High Court decision that “always accessible” means access to load and access to depart. The question remains what “access to leave” covers. Does it have the restricted meaning attributed to it in The Kyzikos – physical obstructions only – or does it apply any cause which prevents the vessel leaving? These considerations do not appear in the judgement and the issue remain open.
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