Great Elephant Corporation v Trafigura Beheer BV & Ors

A charterer may rely on a contractual exception for restraint of princes where the relevant detention was caused by an unlawful governmental demand, even though an earlier contractual breach created the occasion for that intervention. The question is whether the specified cause caused the relevant period of delay and was outside the charterer’s reasonable control. A force majeure clause may similarly protect a party responsible for delegated performance where the failure resulted from an unforeseeable event beyond the reasonable control of the delegate. Notice wording requiring immediate or prompt notice is not ordinarily a condition precedent unless the contract clearly makes it so.

The claimant shipowner claimed demurrage, war-risk insurance and additional operating costs from the charterer after the vessel was delayed in Nigeria following irregularities in the loading of crude oil. The charterer sought to pass liability through the sale chain to Vitol and, in turn, COOSI.

The court considered whether Nigerian loading procedures had been breached, whether criminal offences had been committed, whether the Nigerian authorities acted lawfully, and the effect of contractual clauses concerning demurrage, restraint of princes, force majeure, FOB obligations and the terms implied by section 12 of the Sale of Goods Act 1979.

1. Shipowners’ claim against Trafigura. Loading breached the Nigerian Procedure Guides because it began without DPR Lagos clearance, the export-valve padlock was cut, and loading began without the DPR representative present. The conduct was not culpable because permission had been obtained from the DPR’s Head of Operations. No criminal offence under regulation 3 of the Crude Oil (Transportation and Shipment) Regulations 1984 was established.
2. The delay while cargo documents were withheld fell within the charterparty clause concerning delay while waiting for cargo documentation. Demurrage therefore accrued from expiry of laytime until the documents were placed on board.
3. The delay after 7 September 2009 arose from restraint of princes. The Minister’s demand for a US$12m “fine” was an abuse or arbitrary exercise of power. That cause was outside Trafigura’s reasonable control, and the demurrage rate for that period was consequently reduced by half. The owners’ claim for additional war-risk insurance succeeded because the agreed clause covered the vessel’s entire period in Nigerian waters. The claims for fresh-water production and bunker consumption failed under the restraint-of-princes exception.
4. Claims through the sale chain. Vitol breached Article 18 of the NNPC Conditions and the implied term requiring quiet possession under section 12(2)(b) of the Sale of Goods Act 1979, but those breaches caused only the delay to 7 September. Vitol could rely on the force majeure clause for that period. The requirement for prompt notice was an innominate term sounding in damages, not a condition precedent.
5. COOSI breached its FOB obligation under the Incoterms to obtain the necessary official export authorisation. Nevertheless, its force majeure clause applied because the relevant failure was beyond Total’s reasonable control. Vitol’s claim against COOSI therefore failed, as did Trafigura’s claims against Vitol.