Portolana Compania Naviera Ltd v Vitol SA Inc & Anor

In a voyage charterparty, breakdown of equipment is construed in the context of the contract and its factual matrix. A discharge pipeline is equipment in or about the consignee’s plant. It breaks down when it ceases to function as a discharge pipe, including through malfunction or leakage, regardless of the underlying cause or earlier damage. The exception may apply to a pre-existing or consignee-caused breakdown, but charterers cannot rely on it where the breakdown was caused by their own fault. Delay remains caused by the breakdown despite an earlier failure to repair unless the causal chain is broken. A shifting clause covering movement between discharge berths does not cover leaving a berth while repairs are undertaken, and no general indemnity for resulting expenses will ordinarily be implied.

The owners of the tanker Afrapearl claimed demurrage and additional agency fees and expenses after discharge at a Dakar sealine was interrupted by leakage from damaged pipeline equipment. The charterers relied on clause 8 of the amended Asbatankvoy charterparty, which reduced demurrage for delay caused by a breakdown of equipment in or about the consignee’s plant. The owners also relied on clause 9, concerning shifting between safe berths, to recover expenses caused by repeated movements on and off the sealine.

Tomlinson J held that there was no breakdown within clause 8 and that the expenses were recoverable under clause 9. The charterers appealed. The central issues were the meaning of breakdown, causation, and the scope of the shifting provision.

Lord Justice Clarke delivered the leading judgment, with which Lord Justices Laws and Ward agreed. The appeal was allowed on both issues.

1. Clause 8 and breakdown. The expression breakdown of equipment in or about the plant of the consignee could not be defined in isolation. It had to be construed in the context of the charterparty as a whole and its factual matrix. The pipeline was equipment in or about SAR’s plant. Following the reasoning in Olbena SA v Psara Maritime Inc, equipment breaks down when it no longer functions for its intended purpose. A gap in a flange causing excessive leakage was therefore a breakdown, even if caused by external forces, poor maintenance, earlier damage or neglect. The breakdown could be relevant even though the underlying damage pre-dated the charterparty or the order to discharge at Dakar.
2. Fault and causation. Clause 8 did not require the breakdown to be beyond the charterers’ control. However, it was construed, or supplemented by an implied term, so that charterers could not obtain the half-demurrage benefit where the breakdown resulted from their own fault. The position could differ where the consignee was at fault. The delay was caused by the malfunction even though the consignee might have repaired it earlier. A break in causation would be exceptional and had not been established.
3. Clause 9 and expenses. Clause 9 applied where the charterers exercised a right to shift the vessel from one discharge berth to another. It did not apply where the vessel was ordered away from the only discharge berth to wait while repairs were made. The repeated use of the same berth did not transform the movements into contractual shifts. Clause 8 and clause 9 established different regimes: the former dealt with reduced laytime or demurrage, while the latter expressly provided for shifting expenses.
4. Implied indemnity. The charterparty contained no basis for implying a general obligation to reimburse additional expenses incurred in complying with directions given on behalf of the charterers. If such expenses were intended to be recoverable following a consignee-equipment breakdown, the parties would have said so expressly.
5. The owners were entitled only to half demurrage for the whole period in dispute. The charterers were not liable for the additional agency fees and expenses.

• Court of Appeal (Civil Division): Appeal allowed. The owners were entitled only to half demurrage for the relevant period and could not recover the additional agency fees and expenses.
• High Court, Queen’s Bench Division, Commercial Court: Tomlinson J gave judgment for the owners on demurrage and additional fees and expenses in [2003] EWHC Comm 1904.