Transpetrol Maritime Services Ltd v SJB (Marine Energy) BV

A charterparty warranty that a vessel is approved by named oil companies, qualified by “to the best of Owners’ knowledge”, may impose a continuing obligation throughout the charter. In this commercial context, “approved” meant that the relevant approval letters were in place and that the vessel was not, to the owners’ knowledge, in a condition which would cause the issuing companies to withdraw the assurance they provided. The qualification limited the warranty to the owners’ actual corporate knowledge, but did not excuse knowledge held by the company merely because an individual employee had forgotten it. The obligation to mitigate contractual loss is practical and not exacting. Reasonable steps taken in an emergency are sufficient, and hindsight criticism is inappropriate. Damages were assessed by reference to the price at which the lost sale would probably have been concluded, with an allowance for uncertainty.

Transpetrol, the owners of the tanker Rowan, claimed demurrage under a voyage charterparty. SJB, the charterer, counterclaimed damages for breach of warranty and misrepresentation.

The charterparty referred to five oil-company approvals and incorporated amended Vitol terms. During the voyage, inspections and class-related events at Antwerp revealed numerous deficiencies. Shell and other potential purchasers subsequently declined to deal with the vessel, and SJB sold the cargo for substantially less than the price it said would have been obtained from Shell.

The principal issues were the construction of the approvals clause, the meaning of “approved” and “Tbook”, whether the warranty had been breached, causation, mitigation and the assessment of loss. A number of demurrage issues remained to be determined separately.

1. Construction. The words added beside clause 18 supplemented, rather than replaced, the standard continuing approvals warranty. The earlier description of the vessel did not control the construction of clause 18. Pre-contractual communications and information supplied for possible insertion into the clause were inadmissible or inconclusive for construction.
2. Meaning of approval. In the market context, “approved” did not mean an unconditional advance approval in ordinary English. It referred to the approval letters relied on in the industry, meaning that the vessel was acceptable to the relevant oil majors subject to their continuing and case-by-case vetting processes. The letters were nevertheless the approvals specified by the warranty.
3. “Tbook”. “To the best of Owners’ knowledge” limited the obligation to the owners’ actual corporate knowledge. It did not require enquiries beyond those ordinarily made in the course of the owners’ business. The owners remained responsible for knowledge held by the company, rather than merely by a particular employee.
4. Warranty and causation. The approvals had to remain in place throughout the charter. There would be a breach where an event occurred which, to the owners’ knowledge, would cause the issuer of an approval letter to withdraw or cancel the assurance if it knew of that event. The Antwerp events destroyed the practical comfort provided by the approvals. They caused Shell to reject the vessel and prevented SJB from completing the contemplated sale.
5. Mitigation and damages. SJB acted reasonably in seeking alternative purchasers and storage. The obligation to mitigate was not heavy, and there was no duty to adopt speculative or commercially inappropriate hedging strategies. Following Banco De Portugal v Waterlow [1932] AC 452, remedial steps taken in an emergency were not to be weighed in fine scales. Damages were assessed at WTI plus $11 per barrel, producing $2,675,602.
6. Disposition. The counterclaim succeeded in substance. The demurrage issues at Houston were referred to the Admiralty Registrar for determination on protective costs terms. The estoppel argument concerning withdrawn admissions failed.

First instance decision. No appellate history was stated in the judgment.