Golden Fleece Maritime Inc & Anor v ST Shipping & Transport Inc

A contractual warranty that a vessel is in every way fit to carry specified cargoes includes legal and documentary fitness, not merely physical condition. Where a change in international regulation prevents carriage of a permitted cargo, a due-diligence obligation to maintain or restore the warranted condition may require physical modification and new certification. The obligation is not subject to a financial limit unless frustration arises. A reference to lawful merchandise concerns cargo unlawful in itself; it does not relieve owners from restoring a vessel whose characteristics make carriage unlawful. A continuing compliance warranty must be read in the context of the charter services and may require continued ability to carry the specified cargoes. No additional term is implied where the contract remains workable and the proposed term is unnecessary.

The claimants owned the tankers Elli and Frixos, which they time-chartered to the defendant on Shelltime 4 terms. The charters permitted carriage of crude oil and dirty petroleum products, expressly including fuel oil, and described the vessels as double-sided. They also contained warranties of fitness, eligibility and continuing compliance with applicable conventions and regulations.

Following the adoption and entry into force of MARPOL Regulation 13H, the vessels could not lawfully carry fuel oil without an exemption. Their configuration did not satisfy the exemption requirements because bunker tanks overlapped part of the slop tanks. The owners did not carry out the physical work needed to obtain compliance during the charters.

The owners claimed additional hire under profit-sharing provisions. ST counterclaimed for lost profits, contending that the owners were obliged to restore the vessels’ ability to carry fuel oil. The issues were the construction of the express terms, the proposed implied term, mitigation, and the assessment of damages.

1. Liability. The owners were in breach of both charters. Clauses 1(b) and 1(c) required the vessels, on delivery, to be legally as well as physically fit to carry fuel oil and to perform the charter service. Clause 1(g) required the necessary certificates and documents. The description of the vessels as double-sided and the warranties in clause 52 reinforced that conclusion.
2. Clause 3(i) required due diligence to maintain or restore the stipulated condition whenever any event required it. A change in MARPOL regulations was such an event. The obligation covered legal and documentary fitness as well as physical condition. It could require structural alteration and certification. Due diligence imposed no financial ceiling, absent frustration; reasonable care and skill had to be used to remedy the deficiency within a reasonable time.
3. The words lawful merchandise did not alter that result. Fuel oil was lawful merchandise in itself. The relevant unlawfulness arose from the vessels’ characteristics, so the owners remained obliged to restore their ability to carry it.
4. Clause 52 contained a continuing warranty of compliance with applicable conventions, including MARPOL, read in the context of the charter services. It therefore required continued ability to trade as specified, including carriage of fuel oil. There was no breach of the double-sided description when the charters were made, because that was the ordinary commercial description before the regulatory position became clear.
5. Implied term. No term making the profit-sharing arrangement conditional on fuel-oil carriage was implied. The charters remained workable, and the term was neither necessary for business efficacy nor so obvious that it went without saying.
6. Damages. ST was entitled to recover lost profits, subject to the unresolved redelivery issue concerning the Elli. The court rejected the mitigation argument: cleaning the Elli to seek clean-cargo employment was a reasonable remedial measure. The net figures identified were $481,307.94 for the Elli, subject to adjustment, and $1,253,803.70 for the Frixos. The owners’ profit-share claims were overborne by ST’s set-off and counterclaims. ST was entitled to interest and costs, subject to the final order.

First-instance decision. The judgment itself does not state any prior appellate proceedings.