The Afrapearl

asbatankvoy - breakdown in equipment - effect on safe berth reachable on arrival warranty

PORTOLANA COMPANIA NAVIERA LTD V VITOL SA INC AND ANOTHER (THE "AFRAPEARL") COURT OF APPEAL, Before Lord Justice WARD, Lord Justice CLARKE and Lord Justice LAWS, Apr. 5; July 9, 2004

The Court of Appeal were asked to consider whether a delay in the discharge of cargo due to a defect in the flange of an oil pipeline which prevented proper discharge came within clause 8 of the Charterparty.

Clause 8 provided that where the delay was caused by " a breakdown of machinery or equipment…the rate of demurrage shall be reduced to half".

first instance

At first instance the Court had held that the delay did not constitute a breakdown of equipment, and that demurrage at the full rate was payable. Mr Justice Tomlinson stated that four factors should be considered in assessing whether what had occurred could correctly be described as a breakdown. These were duration, cause, magnitude and whether remedial measures were necessary. As regards the duration element, it was held that the sealine was already leaking before the arrival of the vessel, indeed even before the charterparty was concluded. Mr Justice Tomlinson was of the view that although it was possible that a problem which "pre-dated the making of a charterparty could properly be described as a breakdown…the longer a problem had gone unremedied the more difficult it would be to characterize it as a breakdown".

court of appeal

It was, however, held by the Court of Appeal that, on the facts, the malfunction of the discharge pipe could be categorized as a breakdown of equipment, and the rate of demurrage would thus only be half. Although, it was held that "it was more probable than not that failure of the pipe…occurred after the arrival of the vessel" it is clear that the possible pre-existence of the malfunction was not an insurmountable obstacle to the Charterers in attempting to rely on Clause 8. Indeed, Lord Justice Clarke explicitly states that "each time there was a malfunction of the pipe so as to cause excessive leakage and thus not to function as a pipe it can properly be said there was a breakdown within the meaning of Clause 8. Moreover, I would so hold even if…charterers could only show that the cause of the leakage was malfunction of the pipe caused during…2000".

providing a safe berth reachable on arrival

Under Clause 9 of Asbatankvoy the Charterer must procure a safe berth reachable on arrival. The interpretation of the words "reachable on arrival" were considered at length in the "Laura Prima" 1 [1982] Lloyd's LR 1 with Lord Roskill concluding that "reachable on arrival" was a well known phrase and meant exactly what it said. If a berth could not be reached on arrival, then the warranty would be broken unless there was a relevant protecting exception. It is widely thought that the half rate exception contained within clause 8 is one of these protecting exceptions, in that once the ship is on demurrage, demurrage would only be calculated at half rate, even though the berth may or may not have been reachable on arrival.

conclusions

The consequence of the ruling in the Afrapearl and previous decisions relating to the interrelationship of the half rate exception of clause 8, and the "reachable on arrival" warranty of clause 9, is that it appears that Charterers may be able to utilise the half rate exception to demurrage even if the cause of the "breakdown" on which they seek to rely pre-existed the voyage or even the fixing of the vessel. Therefore, where neither Charterers nor Owners are aware of a pre-existing problem with the equipment which will prevent discharge, Owners may not be able to claim demurrage at the full rate. The fact that a breakdown was caused by a pre-existing problem may reduce the chances of a charterer successfully using the half rate exception, but it is clearly not an impossible hurdle to overcome.