Saturday, June 22, 2024

Disputes over laytime and tug expenses at Miss River

Due to strong river currents, the master may request tug assistance to bring the vessel in or hold it alongside to facilitate cargo operations performed by the stevedores. That may result in disputes about the extra tug expenses and laytime issues when experiencing delays waiting for tugs or during cargo operations. 

In the present dispute, the stevedores suspended operations because, based on their assessment, it was unsafe to conduct operations when the ship was not fully secured to the berth. As a result, the master requested tug assistance to keep the vessel fully secured at berth, and there was a slight delay before tugs came alongside. So, the parties disagreed on: who would pay the additional tug costs and who would bear the time lost waiting for tug assistance (laytime or damages).

The procedure

After a few rounds of correspondence, the Owners served an arbitration notice under the LMAA SCP. The Charterers agreed that one of the three proposed arbitrators would act as a sole arbitrator in the reference. Before proceeding, the parties engaged in protracted exchanges that contained an analysis of authorities, law textbooks and LMAA awards. The below summarizes the parties’ main arguments with relevant citations (where possible) for the readers’ easy reference.

The Owners claim(and reply to defence)

The Owners’ primary claim for tug expenses and laytime (or damages in the alternative) was founded upon an alleged breach of the safe port/berth warranty. Owners provided evidence supporting that this terminal requested other vessels to seek tug assistance during that period, so it was prima facie an unsafe berth. Alternatively, as the matter happened during loading operations, the “loading clause” bites, not the specific “tug assistance” clause. According to the ‘loading clause’, the Charterers remain responsible for loading the vessel and stevedores’ actions; stevedores were unreasonable, incompetent and failed to follow the masters’ instructions. Lastly, the tug assistance was part and parcel of loading as it facilitated the Charterers’ loading operation. Therefore, such a loss must lie where it fell, namely on the Charterers(London arbitration 22/04 was considered).

Alternatively, the Owners asserted that the “tug assistance” clause is ambiguous and since it started life in the Charterers’ proforma, it must be construed against them. Applying the principles of contract interpretation as expounded by Popplewell J (The Ocean Neptune [2018] EWHC 163 (Comm) at para 8), reading the contract as a whole and in a commercial way as commercial people negotiated it, the Charterers’ construction of the charter makes other terms of the contract redundant. Charterers argued that Owners seek to rewrite the contract. In response, the Owners said they were not seeking to invoke commercial convenience to rewrite the contract retrospectively. But if a strict literal approach to interpretation is applied -including what Charterers’ lawyers now think the contract terms to mean in the aftermath- it undermines the commercial parties’ presumed intentions upon negotiating/ entering into this charter. And applying an over-textual analysis negates other relevant contract terms with equal effect and application.

Owners further argued that they are not barred from recovering damages in mitigation (McGregor on Damages para 24-072)  as the ship stayed and operated alongside instead of shifting out, and Charterers have a corresponding obligation to indemnify the owners against loss; expert evidence showed that the characteristics of the specific berth could not be known to the Owners and it cannot be said that Owners assumed any risk (Carver on Charterparties para 1-030). Further, the stevedores/ Charterers controlled this terminal, so a party cannot benefit from his wrongdoing. Lastly, the costs of the tugs were high, and no proper invoices were submitted to support the actual cost. Thus, the owners advanced their claim in three distinct ways; as a claim for an indemnity, as a claim for damages for breach of contract, and as a claim for restitution(recoverability of such payments was governed by the law of restitution, itself based upon the principle of unjust enrichment- London Arbitration 13/1 was considered). As for the terminal tariff terms to justify the invoiced sums, these were brought to the Owners’ attention after the formation of the charter party. Therefore, these terms are not part of the contract between Owners and Charterers.

Concerning the Charterers’ primary defence based on The Isabelle, the Owners tried to distinguish The Isabelle on various grounds: it concerned a dispute that arose out of a voyage charter in the SHELLVOY 3 form dated Dec. 8, 1980 and was decided basis ‘the scheme of the charter-party (see The Isabelle, 367, col 2). The decision concerned the Ressac, but the facts of that case distinguished it from the present one, and it is therefore of no assistance( See also London Arbitration 11/10). In any event, each case is individual and had to be decided on its own merits and, in particular, its facts having regard to the purpose of the contract- Per Bingham LJ, citing the observation of Lord Diplock-‘ First, The Evia was the subject of a time and not a voyage charter. This is not an immaterial distinction, as Lord Diplock’s express reservation (at pp. 310 and 749E of the reports) makes clear. Some practical differences are obvious…’ (The APJ Priti, 40 col 2). No doubt, there are obvious differences between a SHELLVOY 3 form and an amended [X] form. Tankers, compared to bulkers, do not infrequently operate at off-shore installations or- by analogy- to mooring facilities of this kind.

Turning to the decision of Axel Brostrom & Son v Louis Dreyfus & Co, it considers the point of safety during navigation or transit to or from berth and not whilst the ship is alongside; hence not using “her own steam”. Further, the question of ‘safe port’ is a question of fact, a 1932 decision relating to a different port, a different vessel, and different facts is of no assistance in the present case.

The Charterers defence

The charterers denied the owners’ claim and argued that there is no breach of the safe port/ berth warranty; the presence of adverse currents does not make a port unsafe- the locus classicus is the well-known definition set out in the judgment of Sellers LJ in The Eastern City. The tugs were immediately available, and the request for a hold-in tug is part of good ordinary seamanship(falling on Owners). Also, Owners bear the burden to prove that the danger experienced by the vessel at the terminal did not affect every berth to the same extent (The A.P.J Priti [1987] 2 Lloyd’s Rep. 37 referred ). It would be tough to recover the expenses without physical loss or damage; here, there was no damage(see London Arbitration 2/86). Further, the costs of taking ordinary measures to safeguard the ship fall upon the Owners(Voyage Charters para 5.85; Axel Brostrom v. Louis Dreyfus; The Isabelle). Then according to the specific provision “tug assistance” the cost is for the Owners; based on the rule of construction, specific displaces the general(see also The Interpretation of Contracts 6th Ed. Ch 7, s 5). Lastly, there is no ambiguity in reading the term contra proferentem, and its literal meaning should apply. A tribunal will not seek to rewrite an expressly agreed term to achieve a commercial convenience for one party.

Lastly, operations were suspended during the weekend and time is excluded in any event ( SSHEX terms). Then, the Owners revised their position and claimed damages on the ground that the stevedores were incompetent and unreasonable in suspending operation. Thus, the Charterers are in breach of their obligation to employ competent stevedores and/ or under an implied duty of co-operation (not hinder operations- See London Arbitration 8/07) and/or under their duty to act with reasonable diligence and load the cargo. There was no allegation of improper mooring arrangements.

Settlement

Charterers maintained their position based on the specific tug assistance provision and The Isabelle. WPSATC offers were submitted during the exchanges, and the parties commercially settled the dispute.

Some other authorities or arbitration decisions that were not cited but considered are: London Arbitration 11/99 (Owners meet the cost of tugs under a voyage CP), London Arbitration ( Tug expenses and line handling expenses- NYPE), The Trade Green[2000] 1 Loyd’s Rep 451 ( per Moore- Bick J), London Arbitration 1/04( under NYPE CP), Brostrom (Axel) & Son v. Louis Dreyfus & Co., (1932) 44 Ll.L.Rep. 136, The Universal Monarch [1988] 2 Lloyd’s Rep. 483 (Owners sought to recover costs of extra tugs – Whether charterers in breach of safe port warranty), London Arbitration 11/10 ( the Isabelle was distinguished), London Arbitration 2/86 (operation suspended due to bad weather), The Isabelle [1982] 2 Lloyds Rep 81( shifting and tug boat expenses to keep the vessel in place at berth), Voyage Charters ( paras 5.58,5.85, C. 62), Summerskill on Laytime 6th Ed 7-01( currents are not bad weather), London Arbitration 21/19 (Charterers connected to terminal), London Arbitration 18/05 ( delay caused by stevedores failing to follow the masters’ instructions), Voyage Charters 11.12 citing The Sinoe (acts or omissions of stevedores), London Arbitration 18/13 ( whether stevedores incompetent), London Arbitration 5/94( stevedores acted reasonably), London Arbitration 15/17 & London Arbitration 16/04 (request of original invoices).

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