AIC Ltd v Marine Pilot Ltd

A charterparty requiring loading at one named safe port ordinarily contains a warranty that the port is safe. Naming the port does not displace that warranty where the charterparty expressly uses the language of safety. A charterer who supplies less than the contractual minimum cargo may owe deadfreight where the arbitral findings, read as a whole, show that full contractual performance was not tendered. Safety is assessed by asking whether the particular vessel could reach, use and leave the port, absent an abnormal occurrence, without danger that good navigation and seamanship could not avoid. The owners’ deadfreight appeal was allowed, and the charterers’ safe-port appeal was dismissed.

The parties entered into a voyage charterparty for successive voyages by the vessel ARCHIMIDIS. On the sixth voyage, exceptional conditions at Ventspils restricted the vessel’s permissible draft. Only 67,058 metric tonnes were loaded, although the charterparty specified a minimum quantity of 90,000 metric tonnes.

The arbitrators awarded declarations in the owners’ favour on deadfreight and the alternative safe-port claim. Gloster J allowed the charterers’ appeal on deadfreight but dismissed their appeal on the safe-port issue. Both parties obtained permission to appeal. The Court of Appeal had to determine whether less than the contractual minimum had been supplied and whether wording requiring loading at one safe named port created a warranty of port safety.

Sir Anthony Clarke MR delivered the judgment, with which Longmore LJ and Sir William Aldous agreed.

1. Deadfreight. The arbitrators’ findings had to be read as a whole rather than in isolated compartments. Their references to the charterers having formally tendered 93,410.495 tonnes did not establish an actual tender of full contractual performance. The inverted commas around tendered, the master’s statement that only about 67,000 tonnes could be loaded for immediate departure, and the findings that the charterers chose neither available method of supplying a full cargo showed that less than the minimum had been supplied.
2. Under clause 3 of the Asbatankvoy form, the owners were therefore entitled in principle to deadfreight. The judge’s conclusion depended on the mistaken view that the arbitrators had found an actual tender of full performance. The separate question whether the availability of ship-to-ship transfer independently prevented liability did not arise once that construction of the award was rejected. Declaration (iii) was reinstated.
3. Safe port. The words requiring the vessel to load at one safe port, Ventspils, warranted that Ventspils was or would be safe. The wording had to be read with the provision for discharge at safe ports, the express use of the word safe, clause 9, and the fact that the wording was specifically agreed. Naming Ventspils limited the charterers’ choice; it did not convert the clause into an agreement that Ventspils was safe. The relevant meaning of safe was that stated in Leeds Shipping Company Limited v Société Française Bunge [1958] 2 Lloyd’s Rep 127 at p 131.
4. The warranty could potentially be breached where the vessel could not load the full cargo and depart safely as a laden ship, even if good seamanship could avoid immediate danger by loading less cargo or using lightering. Whether Ventspils was in fact unsafe remained for the arbitrators. They also had to consider whether the weather and silting were an abnormal occurrence and whether the clause 19 exclusion for perils of the seas applied. Declaration (iv) remained in force.

• Court of Appeal (Civil Division): Allowed the owners’ appeal on deadfreight, reinstated declaration (iii), dismissed the charterers’ appeal on the safe-port issue, and left declaration (iv) standing: [2008] EWCA Civ 175.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Gloster J allowed the charterers’ appeal against the deadfreight declaration and dismissed their appeal against the safe-port declaration.
• Arbitration: The arbitrators issued an interim declaratory award on 16 May 2006, deciding both issues in principle in favour of the owners.