E D And F Man Sugar Ltd v Unicargo Transportgesellschaft GmbH

Where a charterparty exception refers to “mechanical breakdown at mechanical loading plants”, its meaning depends on the particular wording, the charterparty as a whole, the factual matrix and the nature of the malfunction. Mere failure of machinery to function is insufficient. An external cause is not automatically excluded, but destruction by fire does not, without more, establish mechanical breakdown. The party relying on the exception bears the burden of proving facts bringing the delay within it. A party that treated the cause of the fire as irrelevant at arbitration cannot ordinarily reopen the matter on appeal to obtain further factual findings or introduce fresh evidence.

ED & F Man chartered the Ladytramp from Unicargo under the Sugar Charter Party 1999 Form. A fire destroyed a conveyor-belt system at the intended loading terminal, causing the vessel to wait before loading at Paranagua. The arbitrators awarded the owners demurrage. On a statutory appeal, Mr Justice Eder upheld the award, although not on the arbitrators’ principal ground: [2012] EWHC 2879 (Comm). The charterers appealed, arguing that the fire-related destruction constituted mechanical breakdown and seeking remission for further factual findings. The central issue was whether Clause 28 excused the resulting delay.

Appeal dismissed unanimously. Tomlinson LJ gave the leading judgment, with Christopher Clarke and Patten LJJ agreeing. The arbitrators’ award and Eder J’s decision were upheld.

1. Clause 28 had to be construed by reference to its precise wording, the charterparty as a whole and the factual matrix. The expression “mechanical breakdown at mechanical loading plants” could not be treated as a free-standing rule that any failure of machinery amounted to breakdown.

2. The nature of the malfunction was material. A mechanical breakdown ordinarily involved the mechanism of the plant ceasing to function or malfunctioning, connoting an inherent mechanical problem rather than a wider external cause. External causes were not categorically excluded, however; an external intervention such as an object in the mechanism might properly produce a mechanical breakdown. No all-embracing definition was appropriate.

3. The reasoning in The “Afrapearl” ([2004] EWCA Civ 864) did not compel the charterers’ argument. That case concerned differently worded contractual language and did not establish that destruction of machinery by fire was mechanical breakdown. The arbitrators had found only that the conveyor-belt system was destroyed by fire. The charterers produced no evidence that the fire itself had been caused by mechanical breakdown. They therefore failed to prove that Clause 28 applied.

4. It was inappropriate to remit the matter to the arbitrators. The charterers had maintained that the cause of the fire was irrelevant, had not sought further findings at the arbitration and had not adduced evidence directed to that issue. Reopening the arbitration to introduce evidence which could have been obtained earlier would be doubly inappropriate and, in any event, likely futile.

5. The judge’s separate conclusion concerning nomination of an alternative berth was not challenged. The Court did not need to determine that issue because the mechanical-breakdown ground was sufficient to dispose of the appeal.

1. Court of Appeal (Civil Division): The charterers’ appeal was dismissed. The Court refused remission to the arbitrators.
2. High Court of Justice, Queen’s Bench Division, Commercial Court: On an appeal under s.69 of the Arbitration Act 1996, Eder J upheld the arbitrators’ award, though not on their principal ground: [2012] EWHC 2879 (Comm).
3. Arbitration: The arbitrators upheld the owners’ demurrage claim and awarded US$397,912.77, interest and costs.