AIC Ltd. v Marine Pilot Ltd.

Deadfreight is payable only where the charterer fails contractually to supply a full cargo. A formal tender of the contractual quantity retains legal significance even where both parties know that the vessel cannot safely load or depart with that quantity, particularly where the owner refuses to load it.

A charterer is not required to exercise an optional ship-to-ship transfer right merely to avoid deadfreight where it has already tendered full performance at the berth. Separately, an express description of a named port as a safe port ordinarily constitutes a charterer’s warranty of safety. The warranty concerns the vessel laden with the chartered cargo and includes the ability safely to reach, use and leave the port.

The claimant charterer appealed under section 69 of the Arbitration Act 1996 against preliminary legal conclusions in an arbitration award concerning an oil tanker’s sixth voyage. The vessel loaded approximately 67,000 tonnes at Ventspils because draft restrictions prevented her safely departing with the contractual minimum of 90,000 tonnes.

The tribunal held that the charterer owed deadfreight and that the owner could alternatively pursue damages for breach of a safe-port warranty. The High Court considered whether the charterer’s formal tender was legally effective, whether it had to use an available ship-to-ship transfer option, whether “1 safe port Ventspils” was a warranty, and whether draft restrictions could render the port prospectively unsafe.

1. Deadfreight. The appeal succeeded on the deadfreight issue. Clause 3 required a contractual failure by the charterer to supply a full cargo. It did not make deadfreight payable merely because the vessel ultimately loaded less than the minimum quantity.
2. The tribunal had found that the charterer formally tendered 93,410.495 tonnes. That finding established a tender of full contractual performance. The tender could not be deprived of legal significance merely because the parties knew that the vessel could not safely load or depart with that quantity. The Master had indicated that he would load no more than approximately 67,000 tonnes. In those circumstances the charterer had not failed to supply the cargo.
3. The ship-to-ship transfer clause gave the charterer an option, not an obligation. Since the charterer had tendered full performance at the berth, it was not required to use that alternative method of loading the balance. The tribunal’s contrary conclusion was set aside. The Owner was declared not entitled to claim deadfreight for the shortfall on the sixth voyage.
4. Safe-port warranty. The appeal failed on the construction of “1 safe port Ventspils”. The express use of “safe” in the agreed typed term was not redundant and, construed in context, constituted a warranty by the charterer. A named port does not lose the effect of an express safe-port qualification.
5. A safe-port warranty requires the particular vessel, laden with the chartered cargo, safely to reach, use and return from the port, including necessary routes. Draft restrictions which prevent safe departure with the contractual cargo may therefore constitute unsafety. Whether the silting was an abnormal occurrence, and whether the exclusion for perils of the seas applied, remained for the tribunal to determine.

• Arbitration tribunal: Preliminary award dated 16 May 2006 held the charterer liable for deadfreight and treated the alternative safe-port claim as legally sustainable.
• High Court (Commercial Court): Permission to appeal was granted on 30 August 2006. The court set aside the deadfreight conclusions, substituted a declaration in favour of the charterer, and upheld the legal availability of the alternative safe-port claim, subject to further factual determination by the tribunal.