BP Oil International Ltd v Target Shipping Ltd

Where a voyage charterparty specifies a minimum cargo quantity and permits additional cargo, freight for the excess is payable under the agreed overage machinery unless expressly excluded. A provision applying a reduced overage percentage in one discharge context does not make overage zero in other contexts merely because no separate rate is stated. Where the charterparty, read as a whole, provides an applicable freight rate, the court should apply that rate rather than create a contractual lacuna and order an inquiry into reasonable freight.

BP chartered the vessel Target from Target Shipping Ltd under the BPVOY4 form. The charterparty required a minimum cargo of 80,000 metric tonnes, allowed a full cargo, and stated freight at Worldscale 135 for discharge in the US Gulf. The recap provided for 50 per cent overage for Euromed discharge only.

The Commercial Court held that full freight was not payable on the excess cargo, but that the owners could recover a reasonable sum, subject to an inquiry. The owners appealed, and BP maintained its claim to recover freight paid on the excess. The central issue was whether the charterparty required no overage outside Euromed discharge or full freight on all cargo.

Appeal allowed and BP’s claim dismissed. Lord Justice Longmore delivered the judgment, with Lord Justices Moses and Ward agreeing.

1. Clause 31.1 of the BPVOY4 form provided that, where the cargo quantity in section C was a minimum, freight on cargo loaded above that minimum was payable at the overage rate in section H, unless a lump-sum freight had been agreed. The standard section H wording made overage payable at 50 per cent of the freight rate even where no separate overage rate was stated elsewhere in the charterparty (paras [10], [13]–[14]).
2. The typed recap provision that 50 per cent overage applied to Euromed discharge limited the application of that percentage provision to Euromed. It did not state that no overage was payable for other voyages. The parties had expressly used words such as no overage where they intended to exclude overage. Silence in the other circumstances could not be construed as specification of zero (para [13]).
3. Read together, the recap and the BPVOY4 form showed that Worldscale 135 was the applicable freight rate for the relevant voyage. That rate applied to all the cargo, including cargo loaded above the minimum quantity. The owners’ construction was the natural construction of the contractual documents (paras [16]–[17]).
4. The court rejected the intermediate solution of treating the contract as incomplete and ordering an inquiry into reasonable freight. Where detailed contractual terms are apt to govern the relationship, the court should not make a new contract for the parties merely because an alternative commercial arrangement might be more usual. Evidence that full overage freight was uncommon did not assist on the narrow question of construction (paras [18]–[19]).
5. The court expressed no final view on the owners’ alternative argument concerning BP’s need to plead and prove a different reasonable freight or a relevant mistake, because the owners’ primary construction succeeded (para [20]).

1. Court of Appeal (Civil Division): In [2013] EWCA Civ 196, the owners’ appeal was allowed and BP’s claim was dismissed.
2. Queen’s Bench Division, Commercial Court: Mr Justice Andrew Smith held that full freight was not payable on the excess cargo, but that the owners were entitled to recover a reasonable freight subject to an inquiry.