CM P-Max III Ltd v Petroleos del Norte SA - The Stena Primorsk

DMC/SandT/22/

England

P-Max III Ltd v Petroleos del Norte SA (The “Stena Primorsk”)

English Commercial Court: HHJ Bird: [2022] EWHC 2147 (Comm): 12 August 2022

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2022/2147.html

Matthew McGhee (instructed by Hill Dickinson LLP) for CMP (Owners)

Tom Bird (instructed by Stephenson Harwood LLP) for PdN (Charterers)

VOYAGE CHARTER: SHELLVOY 6 FORM: DEMURRAGE: WHETHER DRAUGHT SUFFICIENT FOR VESSEL TO BERTH AND TO REMAIN ALWAYS SAFELY AFLOAT WHILST DISCHARGING CARGO: UNDER KEEL CLEARANCE (“UKC”) POLICY: WHETHER REFUSAL TO WAIVE BREACH OF UKC POLICY JUSTIFIED: VALIDITY OF NOTICE OF READINESS: WHETHER FREE PRATIQUE GRANTED BY DEFAULT

Summary

In finding that the Owners’ claim for demurrage succeeded, the High Court held that:

(1) in the circumstances of this case, Owners were not at fault in refusing to grant a waiver under the vessel’s UKC policy to permit her to berth and discharge at a port where her UKC would have been breached in the absence of a waiver; and

(2) on the evidence, the port in question operated a default system of customarily granting free pratique, under which the vessel would be informed only when free pratique was withheld. As that had not happened in this case, the Notice of Readiness (“NOR”) given by the vessel on her arrival was held to be valid.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Qualified Mediator, LMAA Supporting Member and International Contributor to DMC’s Case Notes

Background

CMP, Owners of motor tanker “Stena Primorsk”, voyage chartered her to PdN, Charterers, on an amended Shellvoy 6 form dated 9 March 2019, for a single voyage with a cargo of oil, from Bilbao in Northern Spain to Paulsboro, a port on the river Delaware in the state of New Jersey, USA. The charterparty was governed by English law and provided for the jurisdiction of the English High Court.

Northern Marine Management Ltd (“NMM”) were the vessel’s technical operator, as per her Intertanko Chartering Questionnaire 88 (“Q88”), which formed part of the charterparty documents.

The vessel loaded 54,322.913 MT of oil at Bilbao, where it was agreed that she had used almost all of the 72 hours of laytime allowed for loading and discharge. She then proceeded to Paulsboro, to discharge the cargo at the Crown Point International Terminal (“CPIT”).

The vessel arrived at Paulsboro at 2300 hours on 29 March and anchored at the Marcus Hook anchorage. As there was a possibility of her touching bottom (grounding) at the discharging berth, which was tidal, it was necessary to waive the vessel’s UKC policy if discharge were to go ahead at CPIT. Owners – after detailed technical and operational discussions between the Master and NMM – agreed to a waiver of the vessel’s UKC policy.

Accordingly, the vessel made her way to CPIT and was all fast there at 2330 hours on 31 March. However, CPIT informed the Master that, for the first 7-8 hours, unloading would need to take place at a reduced rate of 5,000 barrels per hour (“BPH”). The Master’s view was that the vessel needed to maintain a discharge rate of 15,799 BPH to keep a safe UKC. Therefore, he took the decision to leave the berth, at 0130 hours, and returned to the anchorage, where the vessel arrived at 0500 hours.

On 1 April at 1122 hours, Charterers noted that CPIT was able to discharge the cargo at the rate of 10,000 BPH and requested that the vessel be permitted to discharge at the next high tide at 2100 hours that day. However, the UKC policy would not have been met on arrival at the berth at 2100 hours, as there would have been UKC of 0.9m, whereas the policy required a UKC of 1.22m.

Following a discussion between the Master and NMM, Owners, at 1720 hours that day, refused to grant a UKC policy waiver. NMM and the Master took the view that there would be very little margin for safety to ensure adequate UKC if there were any delays, and any prolonged delays would severely compromise UKC, with the risk of the vessel grounding. As such, NMM concluded that there were insufficient controls to mitigate the risks safely. As a result, the Master noted at 1935 hours that the vessel would need to lighter about 8,100 MT of cargo before reberthing.

Thereafter, lightening took place on 4 April, after which the vessel returned to CPIT. Discharge of the remaining cargo on board was completed on 6 April. Laytime began to run at 1718 hours on 30 March and stopped at 1024 hours on 6 April. After allowance for laytime stoppages, Owners sought demurrage of USD143,153.64.

The parties’ master mariner experts considered that the Master was in a difficult position on the night of 31 March, with his decision to leave the berth being perfectly responsible and sensible, made on safety grounds. As such, the real issue in dispute between the parties concerned the events later on 1 April, the key one being whether the decision not to return to berth for 2100 hours put Owners in breach of the charter or at fault because the vessel – if a waiver had been granted – could have reached the discharging berth safely and discharged the cargo there, always safely afloat, provided that everything went to plan.

Further, Charterers argued that the NOR, required by the charter, was not valid because free pratique had not been granted despite it being customary at the port of discharge to do so.

Judgment

UKC: Demurrage

The judge noted that, irrespective of the charter terms, Charterers needed to establish some “fault” on the part of Owners or those for whom they were responsible if time were to be suspended for demurrage purposes (fn.1). The parties were in agreement that fault was to be given a wide definition, and so did not require an actionable breach of contract to be established.

The judge considered that where Owners (or those for whom they were responsible) acted in a way authorised by the charter it would be difficult to see how they would be at fault. As such, actions set out in the charter were in the parties’ contemplation and Charterers signed up to the voyage on the basis of the operating rules which would govern the Master’s decisions.

In that regard, the judge noted that the loadline information set out in the Q88 rehearsed some of the parameters within which the vessel would be expected to operate. Details of the relevant draught coupled with the UKC policy would influence the choice of discharge port, or berth within a chosen port, and would alert Charterers to the risk that it might be necessary to seek a waiver of the UKC policy. As such, the UKC policy represented a fetter on the Master’s freedom to decide where the vessel went. Further, if that policy were to be breached, the Master needed to consult with Owners’ agent, NMM.

In the judge’s view, it was entirely apt for the charter to describe the Q88 as “integral” to it. The use of the word “waiver” by those familiar with daily vessel operations and with shipping practice generally for UKC policies, strongly indicated to the judge that the UKC policy was considered to be binding and was not to be breached without consent. The importance of the UKC policy was underlined, said the judge, by the fact that there was a need for a careful risk assessment and a UKC calculation, before a waiver could be considered.

The judge did not find it surprising that the charter was silent as to the circumstances in which a waiver might be granted. Whether a waiver would be granted was a matter for Owners. In practice, as seen in the present case, the decision would be taken by the Master and Owners’ agent after consultation. There was no suggestion by Charterers that the power to grant a waiver was in any way limited, nor any suggestion on their part that the Owners’ refusal to grant a waiver in this case was capricious (which might have amount to a “fault”).

Turning to the facts, the judge noted that, on receiving the request for a waiver on 1 April 2019, the Master laid down some clear caveats, namely that (a) the vessel was all fast at 2100 hours with no delays, (b) discharge could commence within three hours, and (c) there was no “technical failure from the terminal or ship”. In the judge’s view, the Master’s reaction was realistic, with the risk analysis predicated on the discharge being trouble free.

Further, in the judge’s view, NMM’s response – as set out in the seventh paragraph of the Background section above – was entirely appropriate, in essence rephrasing the Master’s points, noting their conclusion that there were “insufficient controls to [safely] mitigate the risks”, so that a waiver could not be issued.

In view of the above, the judge concluded that NMM’s refusal to grant a UKC policy waiver, for berthing at 2100 hours on 1 April 2019, was appropriate and did not put Owners in breach of or at “fault” under the charter. In these circumstances, the delays encountered in berthing at Paulsboro were for the Charterers’ account.

NOR: Free Pratique

The charter provided that time at the port of discharge would commence to run six hours after the NOR had been tendered by the Master or Owners’ agents to Charterers or their agents and/or the vessel was securely moored at the specified discharging berth, whichever occurred first. In particular, if Owners “fail to obtain free pratique unless this is not customary prior to berthing…either within the 6 hours after notice of readiness originally tendered or when time would otherwise normally commence under this Charter, then the original notice of readiness shall not be valid”.

The judge noted there were two ways to analyse this issue. First, there was the formal question of whether free pratique was customarily granted. Second, there was the question of the mechanism of the grant/way in which it was granted.

The judge held that, on the evidence, the port authorities had acted as if free pratique had been granted. The US Coastguard, the port pilot and others had all boarded the vessel in the normal course. In the judge’s view, it was inconceivable that Paulsboro would have overlooked the importance of free pratique, despite there being no evidence of an actual grant. Indeed, the judge noted that the Master had lodged a letter of protest because there was no express grant, and that there was no record of any grant on the statement of facts.

Consequently, the judge considered that the answer lay in the second question. The evidence supported the view that there was no formal mechanism for the grant of free pratique. Accordingly, the judge held that free pratique was customarily granted at the port and that free pratique was so granted in this case, the port operating a system of free pratique “by default”, such that the vessel would only be informed if free pratique were being withheld.

Conclusion

The judge gave judgment for Owners in their claim for demurrage, in the amount of USD143,153.64

Comment

This judgment is most notable for tackling the issue of a vessel’s UKC policy, on which the judge has given helpful guidance. The result turned mostly on technical matters of fact. However, if the UKC policy in the charter would be breached by a proposed berthing and a waiver were not granted, the threshold to prove fault is seemingly high. This is on the premise that the right to refuse a waiver is absolute save, perhaps, in the case of a capricious refusal (being a refusal to grant a waiver which is not grounded on an appropriate assessment of the risks faced).

Footnote 1:

The “Fontevivo” [1975] 1 Lloyd’s Rep. 339