E D and F Man v Unicargo Transport

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DMC/SandT/13/XX

England

E.D. & F. Man Sugar Ltd v Unicargo Transportgesellschaft mBh

English High Court (Commercial Court): Eder J: [2012] EWHC 2879 (Comm): 23 October 2012

Mr Timothy Young QC, instructed by Messrs Jackson Parton, for the Claimant charterers

Mr Nevil Philips, instructed by Messrs Waltons & Morse LLP, for the Defendant shipowners

CHARTERPARTY: LAYTIME AND DEMURRAGE: DESTRUCTION OF CONVEYOR-BELT SYSTEM AT LOADING PORT BEFORE FIXTURE: DELAY IN BERTHING: NO OBLIGATION ON CHARTERERS TO NOMINATE A SECOND BERTH: DESTRUCTION DID NOT CONSTITUTE MECHANICAL BREAKDOWN: ACT OF STATE-SPONSORED PORT AUTHORITY IN ORDINARY COURSE OF CARRYING OUT PORT OR ADMINISTRATIVE FUNCTIONS DID NOT FALL WITHIN EXCEPTION OF GOVERNMENT INTERFERENCE

Summary

The Commercial Court held that, on a true construction of the Sugar Charter Party Form 1999, there was no obligation on a charterer to nominate a second berth when the conveyor-belt system at the intended berth was destroyed by a fire. However, the destruction of the conveyor-belt system could not, as a matter of ordinary language and common sense, fall within the exception of “mechanical breakdown at mechanical loading plant” and thus stop the running of laytime. The administrative re-scheduling of cargo after the fire also did not constitute “government interference”. None of the excepted perils applied to stop the running of laytime.

This note has been contributed by Ken T.C. Lee, LLB(Hons), PCLL (University of Hong Kong), BCL(Oxon) and barrister-at-law in Hong Kong.

Background

The Claimant charterers, E.D. & F. Man Sugar Ltd, and the Defendant shipowners, Unicargo Transportgesellschaft mbH, entered into a charterparty of MV “Ladytramp” on “Sugar Charter Party 1999” form dated 9 June 2010. Paranagua was declared as the loading port.

Clause 3 of the charterparty provided that the Vessel “shall… sail and proceed to 1-2 safe berth(s), 1 safe port (intention Santos) but not south of Paranagua.”

The charterparty further stated: “Clause 6:… The Act of God, perils of the sea, fire on board, in hulk or craft, or on shore,… excepted…”

“Clause 19:… At loading port, even if loading commences earlier, laytime for loading to begin at 1400 hours if e-mailed notice of readiness to load is tendered to agents before noon and at 0800 hours next working day if e-mailed notice of readiness is tendered to agents after noon…”

“Clause 28: In the event that whilst at or off the loading place… the loading… of the vessel is prevented or delayed by any of the following occurrences:… accidents and/or breakdowns on railways,… mechanical breakdowns at mechanical loading plants, government interferences… time so lost shall not count as laytime.”

In an email dated 4 June 2010, the local agent advised the parties that a fire had occurred at the Compania Brasilliera Logistica A/A terminal (CBL), which was the terminal normally used by the Charterers and where they had initially scheduled the vessel to load. The fire destroyed the conveyor-belt system linking the terminal to the warehouse. Local experts were of the view that the system would be inoperable for at least 3 months, and that the Charterers would need to transfer the cargo intended for the vessel to another terminal.

On 20 June 2010, the vessel arrived at Paranagua and tendered notice of readiness to load. Due to the absence of an available berth, the vessel remained off the port until 14 July 2010 awaiting berthing instructions. As another berth, the Centro Sul Servicos Maritimos Terminal, which was adjacent but unconnected to the CBL warehouse, was judged to provide the charterers with the fastest option to obtain replacement sugar for loading, an application for berthing was accordingly made to the port authority and the vessel berthed there on 15 July 2010. Loading commenced on 18 July 2010 and was completed on 20 July 2010.

The Shipowners contended that time began to count at 1400 hours on 21 June 2010 under the charterparty and that allowing for permissible laytime, laytime expired on 25 June 2010. The vessel was subsequently on demurrage until 20 July 2010 when loading was completed. On the other hand, the Charterers contended that Clause 28 applied so that time lost due to the destruction of the conveyor-belt system should not be counted towards laytime.

Arbitration commenced and the arbitral tribunal held in favour of the Shipowners. It was of the view that the Charterers had an obligation to nominate an alternative berth. They could only rely on Clause 28 to exclude from laytime the time lost as a result of their inability to use the CBL terminal if the terminal had been named in the charterparty so that they could not nominate an alternative berth. This was not the case here. There were alternative berths at which the vessel could load and the Charterers had some flexibility in arranging cargo for the vessel. The only sense in which loading was “prevented or delayed” was that it became impossible to load at the berth originally intended. In any event, fire was not an excepted peril. The inoperability of the conveyor belt did not constitute “mechanical breakdowns at mechanical loading plants”, and the decisions by the port authority to re-schedule the loading or discharging of vessels in light of the fire could not amount to “government interferences”.

The Charterers obtained leave under s.69 of the Arbitration Act 1996 to appeal against the award on the following question of law: Whether delay in loading caused by and/or in consequence of a fire which destroyed mechanical loading equipment (and/or a port’s authority’s re-scheduling of loading following such destruction) counted as laytime under the charterparty and whether the fact that loading thereunder at “1-2 safe berths” was lawfully relevant to the operation of Clause 28 of the charterparty.

Judgment

Eder J dismissed the Charterers’ appeal.

The Court was of the view that the tribunal approached the present case by asking the wrong question, that is, whether the Charterers had a relevant legal obligation to nominate an alternative loading berth when the CBL Terminal became unusable. The present case was not one about berth nomination but whether there was prevention or delay in loading caused by a relevant excepted peril. The Charterers were entitled to require the vessel to wait until the CBL terminal was again usable: Reardon Smith v Ministry of Agriculture (The Vancouver Strikes Cases) [1963] AC 691. Even if the wording requiring the vessel to proceed to “1-2 safe berths” in Clause 3 imposed on the Charterers an obligation to nominate a second berth, it was not a pre-condition to the operation of Clause 28. There could still be prevention or delay in loading while that was being done.

The correct approach was to consider: (i) whether there was prevention or delay in loading, and if there was (ii) was it caused by an excepted peril and (iii) how long was the relevant delay in loading.

The Tribunal appeared to have thought that there was in fact prevention or delay. Eder J rejected the Shipowners’ argument that the words “whilst at or off the loading place” in Clause 28 should be interpreted as requiring the excepted event to occur while the vessel was at or off the loading place. It was most uncommercial to suggest that the ability of the Charterers to rely on Clause 28 should depend on whether the relevant event occurred a minute before as opposed to a minute after the arrival of the vessel.

However, Eder J held that the present case did not fall within any of the excepted perils in Clause 28. The destruction of the conveyor-belt system did not, as a matter of ordinary language and common sense, constitute “breakdown”, still less “mechanical breakdown”. As Goff J stated in The Thanassis A (1982, unreported), the colloquial use of the word “breakdown” in relation to things as motorcars seemed to indicate that the word meant some inherent defect of machinery of the car itself which led to the breakdown.

There was nothing to indicate a wider construction to the phrase “mechanical breakdown at mechanical plant,” and the Court rejected the Charterers’ contention that the cause of the breakdown was irrelevant. The word “mechanical” served to restrict the scope of “breakdown”, that is, what was required was a breakdown of a mechanical nature in the sense that it was the mechanism of the mechanical loading plant which ceased to function or malfunctioned, and caused the prevention of or delay to loading. This contrasted with the phrase “accidents and/or breakdown on railways” in the same clause, where the inclusion of the word “accidents” broadened the scope of the railways exception. While Clause 6 expressly provided for a fire exception in the form of “fire on board, in hulk or craft, or on shore,” Clause 28 contained no reference to fire and “fire” was therefore not intended to be an exception to the running of laytime.

It was further held that the exception of “government interference” did not apply here. There was no finding by the tribunal that the port authority at Paranagua or in control of the CBL terminal was a government entity, or that permission to berth at the CBL terminal was suspended by the port authority.

In any event, as a matter of construction, the phrase “government interference” was not intended to encompass an administrative re-scheduling of cargoes due to a fire. The exceptions in Clause 28 were intended to be of general application and did not depend on the nature of the berth in question. It could not be that laytime would stop running while a vessel was ordered off a berth by reason of poor weather or in order to accommodate the terminal operator’s desire to give priority to another vessel, if the berth operator was a government entity, but not otherwise – even though neither scenario alone would stop the running of laytime. The phrase could not have been intended to encompass a state-sponsored port authority acting in the ordinary course of carrying out its port or berth administrative functionas distinct from a government entity acting specifically/peculiarly in a sovereign capacity which was independent of that ordinary administrative function.