Regulus Ship Services PTE Ltd v Lundin Services BV & Anor

A contractual requirement that a tow be provided in light ballast condition ordinarily means the minimum ballast necessary for physical safety and seaworthiness on the voyage. It is not determined by a marine warranty surveyor’s preferences, class requirements or the desire to minimise fatigue. A breach of that obligation requires proof of causative loss. A contractual delay-payment clause applies only where the contractual conditions for its operation are established. Commercial negotiations about estimated speed and fuel consumption do not readily create a collateral warranty or implied term guaranteeing speed. A purported contractual cancellation which is plainly ineffective may nevertheless amount objectively to a repudiation where it shows an immediate refusal to perform.

The claimant agreed to tow the defendants’ FPSO from Tunisia to Malaysia under a BIMCO Towcon. The contract required the FPSO to be provided in light ballast condition. The claimant alleged that excessive ballast caused delay and excess fuel consumption, and claimed delay payments and related losses. The defendants denied liability and counterclaimed damages, alleging that the claimant had warranted an average speed of about 4.5 knots.

During the voyage the claimant diverted the convoy to Singapore and purported to cancel the Towcon. The defendants accepted that repudiation and arranged substitute towage. The issues included the meaning of light ballast condition, causation, the availability of contractual delay payments, the alleged speed warranty, and the effect of the cancellation communications.

The court found for the parties in part.

1. Light ballast condition. The expression meant the minimum ballast necessary to enable the tow to proceed safely and seaworthy on the voyage. It did not mean the ballast condition preferred by a marine warranty surveyor, nor did it include ballast added merely to minimise fatigue or preserve the vessel’s working life. The defendants were in breach because the FPSO departed with excessive ballast and remained above its proper light ballast condition, which the court assessed at about 74,500 metric tonnes: Ease Faith Ltd v Leonis Marine Management Ltd [2006] 1 Lloyd’s Rep 673.
2. Causation and delay payments. The claimant failed to prove that the excess ballast caused delay or loss. The evidence showed that deballasting did not increase average speed, and other factors could counteract any reduction in resistance. The claimant therefore recovered no more than nominal damages for the ballast breach. Clause 17 did not generate delay payments because there was no evidence that the tug had decided to slow steam, or that the tow was incapable of being towed at 4.5 knots.
3. Speed obligation. The negotiations concerning 4.5 knots concerned pricing, engine use and anticipated fuel consumption. They did not create a collateral warranty. Nor was a speed term necessary to give the detailed Towcon business efficacy or so obvious that it went without saying. The defendants’ counterclaim based on such a warranty or implied term failed: Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72.
4. Repudiation. The defendants’ temporary refusal to resume the tow was a breach but not repudiatory. The claimant’s email purporting to cancel under a clause requiring 48 hours’ notice was ineffective as a contractual notice. Objectively, however, it showed an immediate and unequivocal refusal to perform. It therefore repudiated the Towcon, which the defendants accepted: Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 HL; The Nanfri [1979] AC 757 HL; Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168.
5. The defendants recovered the reasonable additional cost of substitute towage, subject to credit for the unpaid balance that would have been payable under the original contract. Agreed or unopposed sums were set off, producing a net amount due to the defendants.