American Overseas Marine Corp v Golar Commodities Ltd

A contractual prohibition on cargoes “injurious to the vessel” ordinarily concerns a propensity to cause physical damage. It may be breached even where damage has not yet occurred, if the cargo is of a kind tending to cause such damage. The clause does not ordinarily extend to cargo that merely requires cleaning or causes loss of trading time without physical damage. The party alleging breach must prove both that the prohibited cargo was shipped and that the alleged loss was caused by the breach. Remedial expenditure is recoverable only where the response was reasonable and the loss is properly proved. A court will not grant a general declaration concerning speculative future claims where it may preclude proper argument when a specific claim arises.

American Overseas Marine Corporation, the managing owners of the LNG carrier LNG Gemini, chartered the vessel to Golar Commodities Ltd under a time charterparty. Clause 30 prohibited the shipment of cargoes injurious to the vessel and made damage and repair time chargeable to the charterers.

After loading LNG at the Cameron Terminal, unusually large quantities of debris were found in the vessel’s strainers. Further debris was later found in cargo systems and tanks. AOM alleged that metallic particles from the Cameron cargo created a risk of damage, requiring inspections and extensive pump work, and claimed damages and an indemnity. Golar denied liability and counterclaimed an undisputed sum.

The central issues were whether the cargo was injurious to the vessel, whether the claimed work and expenditure were caused by any breach and reasonably incurred, and whether AOM had proved its losses.

1. Liability. The claim was dismissed. Clause 30 was directed to physical damage. Its reference to acids and explosives, its focus on repairs, and its provision for time taken to repair damage supported that construction. A cargo could nevertheless be injurious without having caused actual damage if it had a tendency or propensity to cause physical damage.
2. AOM proved only that some small particles, including some metallic particles, probably passed through the filters. It did not prove that a significant quantity of Cameron debris entered the tanks, or that most of the debris found at Subic Bay came from Cameron. Other possible sources included the vessel’s inert-gas system, the collapsed booster blower, later cargoes and the pumps themselves.
3. The evidence did not establish that the particles created a real risk of damage to the pumps, electrical motors, sensors or tanks. Industry practice tolerated particles capable of passing through commonly used 20- or 60-mesh filters. Cases of damage from debris were rare, and the evidence of possible damage was speculative. The pumps had not been damaged.
4. Even if the cargo had been injurious, most heads of loss were unproved or would not have been recoverable. Work on the pumps was reasonable in principle on the assumed case, but AOM did not justify sending the vessel from Subic Bay to Singapore. Advice from Pronav and Atlas Copco did not itself establish causation or reasonableness, particularly where Atlas Copco had misunderstood the facts.
5. AOM was not entitled to a general indemnity declaration. Applying the principle explained in Trans Trust SPRL v Danubian Trading Co [1952] QB 297, such relief should not be granted in general terms where it might preclude proper argument when a specific claim arose. Golar was entitled to judgment on its counterclaim.