Triton Navigation Ltd. v Vitol SA

This is an appeal against that part of the judgment given by Moore-Bick J on 23^rd January 2003 which held the appellant charterers (“Vitol”) liable for demurrage in the sum of US$291,691.75 in respect of the detention of the Nikmary at Sikka, India between 9^th December 2000 and 2^nd January 2001. There is no challenge to any of the judge’s findings of primary fact.

The Nikmary was chartered by the respondent (“Triton”) to Vitol on 3^rd November 2000 on the Asbatankvoy form, with a large number of amendments following from the incorporation of Vitol’s own chartering clauses, which were themselves made subject to certain amendments. The material terms of the charter, taking into account such amendments, included the following:

Vitol chartered the vessel in order to load a cargo of gasoil which it had contracted to buy from the refinery at Sikka operated by Reliance Petroleum Limited (“Reliance”). The purchase contract dated 31^st October 2000 provided inter alia:

Reliance’s refinery produces a continuous stream of gasoil, at that time of only one grade, though subject to slight variation in its detailed specification from time to time. The product passes after manufacture into Reliance’s own storage tanks, which are linked to a land pipeline and to dedicated berths for shipments on coastal and export vessels. As a general rule, it appears that only one vessel would berth at a time. The storage tanks have only a limited capacity. In order to maintain continuous production, Reliance had therefore to ensure that product was moved continuously out of the storage tanks, either via the pipeline for Indian domestic use or by vessel for domestic use or export. Reliance supplied gasoil primarily to the domestic market, which it had an obligation to supply in accordance with quotas imposed on it by the Indian Oil Co-ordination Committee. The Committee notified Reliance of each month’s quota early in the month. Reliance attached importance to meeting its monthly obligations in respect of the quotas so notified as well as any other commitments which it had undertaken for the month in question. Reliance had received its December quota from the Committee, according to the judge’s finding, “by the evening of 5^th December 2000”. During December 2000, Reliance produced about 968,000 tons of gasoil, of which about 745,000 tons went to the domestic market and the rest was exported. A large part of this gasoil would have met the specification required under Reliance’s contract with Vitol (in particular a requirement for no more than 0.2% sulphur).

The Nikmary was delayed for reasons which were not suggested to be Triton’s fault. Triton sought and obtained from Vitol extensions of the charterparty cancelling date, on 22^nd to 29^th November and on or about 27^th November to 2^nd December. Vitol did not exercise its right to cancel the charter after those extensions expired. Vitol did no more than keep Reliance informed of the vessel’s updated ETAs, and make requests to Reliance to berth the vessel immediately on her arrival. The judge found (paragraph 32) that

The vessel arrived outside the port on 30^th November and spent some time cleaning her tanks. She then entered the port and served a notice of readiness at 2200 hours on 2^nd December. Reliance arranged a berth to which she proceeded on 3^rd December, and where, the judge found, Reliance would have loaded her with suitable gasoil, had her tanks been appropriately clean. However, inspection by Intertek Testing Services Caleb Brett (“Caleb Brett”), surveyors jointly appointed by Reliance and Vitol, led to her rejection on the ground that her tanks were not clean. She returned to anchorage, and there undertook further cleaning. On 4^th December there was a further inspection, this time by both Caleb Brett appointed by Reliance and Vitol and another firm of surveyors, Admiralty Marine Services, appointed by the vessel’s agents, Interocean Shipping (India) Pvt. Ltd. (“Admiralty”). The vessel was again rejected as unclean. The judge made no positive finding that Reliance would have been prepared to load her on 4^th or 5^th December, had she proved clean on this inspection at anchorage. At paragraph 24 of his judgment, he linked Reliance’s subsequent unwillingness to load to other December commitments which were crystallised “by the evening of 5^th December”. So the precise point of time in early December up to which Reliance would have been prepared immediately to load the vessel, if clean, remains unclear. Finally, on 5^th December, after yet further cleaning, the vessel was accepted as a result of an inspection again undertaken by Caleb Brett and Admiralty, as well as on this occasion by Ericson & Richards (Gujarat), surveyors appointed by the vessel’s P & I Club’s local representatives. The judge said (at paragraph 41) that the evidence did not “enable [him] to find that the vessel could with reasonable efforts have been made ready to load before 5^th December 2000”. Following this third inspection, a (valid) notice of readiness was given, at 19.30 hours on 5^th December 2000.

Reliance had by then received its December quota for domestic supply from the Committee, and was unwilling to provide a cargo for the Nikmary until after it had met all its commitments under that quota and in respect of contracts entered into for December shipments. Accordingly, on 9^th December 2001 Reliance informed Vitol that “considering our current commitments, we will be able to load this vessel only by end of December 2000”. Vitol replied on 12^th December 2001 expressing their concern at this advice, and saying that

Vitol’s protest was to no avail. Only on 2^nd January 2001 was Reliance prepared to load the vessel and to allow her to berth accordingly. Hoses were connected for loading at 0445 hours on 3^rd January 2001 and loading of 27,886 m.t. of gasoil was completed late on 3^rd January 2001. Triton’s case is that laytime ran from 01.30 hours on 6^th December 2000 (6 hours after the notice of readiness given on 5^th December 2000); that the laytime of 84 hours expired at 13.30 hours on 9^th December 2000; and that the vessel was accordingly on demurrage for 25 days 8 hours and 45 minutes until 22.15 hours on 3^rd January 2001 (the time of supply of cargo documents following completion of loading). The judge awarded demurrage accordingly. Vitol now appeals, contending that time did not run for the purposes of laytime or demurrage until connection of hoses on 3^rd January 2001, so that no load-port demurrage was incurred.

It is for Vitol to establish any ground on which laytime and demurrage did not run as Triton claimed and as the judge awarded. That follows from the provision in clause 6 of the charter for laytime to commence 6 hours after notice of readiness and from the laytime allowance of 84 hours provided elsewhere in the charter. Vitol relies on three separate grounds to postpone the commencement of laytime: (i) the penultimate sentence of clause 6; (ii) the provisions of clause 30(c)(v); and (iii) the common law principle whereby laytime and demurrage are interrupted where delay is caused by shipowners’ fault.

These grounds involve some differing considerations. But Triton has one basic response which is common to all, namely that the delay arose from Vitol’s failure to provide cargo available for loading. Vitol in reply does not contend that it had, as a result of clause 6 or 30 or on any other basis, no obligation whatever to provide cargo for loading. But it submits that, on a proper analysis, it complied, or complied in due time, with all such obligations as it had in that regard. The nature and timing of Vitol’s obligation to provide cargo are central to this case.

As a matter of general law, Mr Hill accepts that (i) a voyage charterer owes an absolute and non-delegable duty to provide cargo for loading and (ii) that charterparty exceptions (e.g. in respect of strikes) will normally be read as protecting a charterer only in respect of its duty to load, and not as covering its duty to provide cargo, although they may cover the latter if sufficiently clear and distinct words are used.

These principles are firmly rooted in a series of House of Lords decisions. The Earl of Selborne LC, giving the main speech in Grant -v- Coverdale (1884) 9 App. Cas. 470, 475-6 said this, in a passage part of which I have italicised for its particular relevance to this case:

As to timing, Mr Hill submits that the underlying principle is that a charterer must provide cargo for loading within a reasonable time. He accepts that this commonly requires a charterer to provide cargo in time to enable its loading to be effected within the laydays, but he submits that whether this is so in any particular case depends on the circumstances. He referred us to Universal Cargo Carriers Corp. -v- Citati [1957] QB 401, 428-9, where Devlin J stated the law as follows (emphasis added):

Devlin J’s formulation does not support Mr Hill’s submission that a reasonable time may, in particular circumstances, extend to allow cargo to be provided at a time when it is too late to load it within the stipulated laydays. The concept of a reasonable time for provision of a berth and cargo is tied firmly by Devlin J’s formulation to the time necessary to enable the main duty (loading) to be performed within the laydays. Any other approach would involve the conceptual anomaly that the period allowed to the charterer for loading could expire before the charterer was under any duty to provide any cargo for loading.

A similarly absolute duty to have cargo available for loading may arise even prior to the commencement of the laydays, where the availability of all or some of the cargo at the port ready for loading is a pre-requisite to obtaining permission for the vessel to enter a port or berth, in order to become an arrived ship under the particular charterparty terms. At one stage in the law’s development, it may have been arguable that any duty at this stage was limited to doing what was reasonable, or to co-operate so far as lay within the charterer’s power, to have such cargo available (cf e.g. Greer LJ’s formulation in Vergottis -v- Cory [1926] 2 KB 344, 355 and Parker LJ’s expression of wishes in Sociedad Financiera de Bienes Raices SA -v- Agrimpex (The Aello) [1958] 2 QB 385, 402-3). But it is now clear on highest authority that any duty at this stage is also absolute: Ardan -v- Weir [1905] AC 501, as explained and followed in the House of Lords in The Aello [1961] AC 135, where Lord Radcliffe put the matter as follows (emphasis again added), at pages 176-7:

I turn to apply these principles. Mr Hill’s primary submission is that Vitol at all times had cargo available, and that its loading was merely delayed by what he described as “scheduling congestion”. It is at this point necessary to look once again at the relationship between Reliance and Vitol. This is the subject of paragraph 32 of the judges’ judgment, quoted in paragraph 5 above. Later, at paragraph 38, the judge summarised the position as follows:

The judges’ findings in paragraphs 32 and 38 leave open whether there was any subsisting contractual relationship after the expiry of the November 2000 shipment period in the Reliance contract. But I would see some difficulty in treating the situation as one where Vitol had no supply contract at all throughout December, particularly when Reliance called the vessel in to berth on 3^rd December in order to load her and gave various estimated loading dates thereafter. There is on the other hand also some difficulty about Mr Hill’s submission that it was open to Reliance to affirm the contract, on terms that it would supply the vessel with cargo, not within the laydays (incorporated into the original Reliance contract) and not in accordance with the order in which vessels presented ready for loading at Sikka, but after satisfying all its December commitments (about which Vitol’s contemporary protest on 12th December 2000 suggests that Vitol had no knowledge). Possibly the right analysis is that there was some sort of agreed variation or fresh contract, whereby Reliance kept open when it would supply cargo. However this may be, the judge’s judgment is only consistent with a situation where, although there may have been some continuing contractual relationship, Reliance had a considerable freedom under it as to when to supply cargo, and in particular it was open to Reliance to give priority to its commitments for December supply.

I cannot accept Mr Hill’s submission that the obstacle to performance of the charter met by Vitol can or should be categorised as one relating to loading, rather than provision of cargo; or that the case resembles one where the physical congestion of vessels occupying or waiting for berths prevents a vessel from reaching a loading berth. It is true that other gasoil had to be delivered (or both manufactured and delivered) by Reliance, before the Nikmary could berth. But the problem faced by Vitol was not a problem in obtaining access to or loading immediately accessible cargo. The reason why the Nikmary was not permitted to berth was not that the other vessels were occupying Reliance’s berth(s) or had arrived first at the anchorage, to wait their turn to do so. It was a contractual reason, namely that, in so far as Vitol had any continuing contractual right to cargo at all, it was one which postponed Vitol to all those other buyers to whom Reliance had or incurred December commitments. It was as if Vitol had contracted expressly with Reliance for gasoil to be supplied in early January 2001, or “after all Reliance’s December commitments”; or as if (to take circumstances similar to those discussed by the Earl of Selborne in Grant -v- Coverdale) the cargo which Vitol had arranged was delayed in transport to the loading place behind a queue of other cargo. In none of these situations could Vitol assert that it had satisfied its absolute duty to provide cargo to load a vessel which was ready to load during laydays commencing on 5^th December 2000. The present situation is, as I see it, no different. The problem was a contractual procurement problem, which related to the charterer’s business and arrangements (cf the citations from Grant -v- Coverdale, Bunge -v- Brightman and The Aello above) and meant, in effect, that Vitol had no cargo available until early January 2001 for loading. It is artificial and inappropriate to try to analyse it as involving a problem in loading. Loading could not take place until Reliance accepted that it both had and would perform a contractual commitment to Vitol to provide cargo, and this it would not and did not do until after it had satisfied all its December supply commitments. I add only that I do not consider that it could assist Vitol as against Triton, even if one were to suppose (contrary to the tenor of the judgment and to any submission made by either party before us) that Reliance did have a continuing or renewed contractual obligation towards Vitol to supply cargo within the charter laydays. Since the duty to provide cargo is absolute and non-delegable, this hypothesis would not excuse Vitol from providing cargo to load on the Nikmary within the laydays; it would merely demonstrate that Vitol had a back-to-back claim against Reliance for breach of the supply contract.

Mr Hill’s alternative submission is that Vitol’s duty was no more than a duty to provide cargo within a reasonable time, and that, in the unusual circumstances of this case, Vitol satisfied any such duty by providing cargo for loading at the time when the vessel was actually loaded in early January 2001. The fundamental obstacle to this submission is identified in paragraph 14 above. Mr Hill points out that none of the previous authorities relates to a factual situation precisely analogous to the present. He refers to the fact that the Nikmary arrived after the charter cancelling date, and that Reliance would have been willing to load the Nikmary had she proved clean on 3^rd December (or possibly even 4^th December, although the judge made no finding to this effect). But the answer to that is, as the judge concluded, that the vessel’s unreadiness for loading until late on 5^th December involved no breach of charter, that Triton had no obligation to have her ready to load by 3^rd or 4^th December, and that, if she had tendered for the first time on 5^th December 2000 without any previous tender at all and had been found clean, Vitol would still not have had any gasoil available with which to load her until early January 2001. Vitol had a right to cancel the charter, for presentation after the agreed cancelling date, but it chose not to exercise that right. No doubt, it had good commercial reason not to do so. It may have been influenced by some indication by Reliance in early December that loading might occur quite soon. If so, that is a matter between it and Reliance. Vitol may very probably have been keen to uplift the Reliance cargo, in order to fulfil a sub-sale about which we know very little. But once it decided to maintain its charter from Triton in force, it continued to have the normal obligations under it regarding provision of cargo and the timing of such provision. It was for Vitol to ensure that it had appropriate back-to-back arrangements in force with both its suppliers, Reliance, and any sub-buyers.

Against this background, I turn to the three particular grounds on which Vitol maintains that laytime and demurrage did not run or accrue due. I start with clause 6. This is a standard exceptions clause, in terms which cannot be read as embracing Vitol’s duty to provide a cargo, and Mr Hill does not suggest otherwise. It therefore offers Vitol no protection in respect of its failure to have cargo ready for loading at any time between 6^th December 2000 and 2^nd January 2001. I add that, even in respect of loading, clause 6 only assists in the case of delay caused to the vessel getting into berth “for any reason over which Charterer has no control”. So, if the present problem could correctly be categorised as one relating to loading, I do not see how clause 6 could assist in the present circumstances. Vitol’s contractual arrangements with Reliance were clearly within Vitol’s control. Delay because Vitol’s only arrangement was for loading when Reliance became willing to load, or after Reliance had met its other December commitments, could not be delay caused for a reason over which Vitol had no control.

The judge excluded the application of this clause on the simple basis that there was no “jointly appointed inspector” when the vessel was rejected on 4th December 2000, and none when she was found clean on 5^th December 2000. There were on 4^th December two inspectors, separately appointed, one by Reliance/Vitol, the other by Triton, and on 5^th December there were three inspectors, the same two as on 4th December, appointed on the same basis, and also the P & I inspector. On what is probably the critical inspection, when considering clause 30(c)(v), these inspectors carried out what might be called a joint inspection, in the sense that they went round the tanks together, and they arrived at common conclusions, which they reflected in separate, though effectively identically expressed, certificates. The judge recorded that Mr Hill submitted “with some justification … that the requirements of the clause had been satisfied in spirit, if not in form”, but he regarded the clause as unambiguous, and as incapable of covering what actually happened. There was no reason why the parties should not have agreed, originally or by variation of the charter, that a joint inspection, leading to a common result, such as actually occurred, should not suffice, but there was no evidence that they ever had done. The judge was in my view correct in relation to the actual wording of the clause. The words “jointly appointed inspector” were substituted by agreement for the words “charterer’s inspector” which appear in Vitol’s standard chartering clauses and which remain, unaltered, in clause 30(c)(i) of the present charter. Whether this fact, which itself appears from the fixture recap telex, is admissible or not, I do not gain any real assistance from it, certainly not in support of Vitol’s case that “jointly appointed inspector” should be read as covering the present situation. There is no basis for thinking that the parties made any mistake in the words they used. They envisaged joint appointment, not a joint inspection by separately appointed inspectors. No doubt, if they had jointly appointed two inspectors to agree on and issue a single report, that would suffice. But separately instructed inspectors whose reports may or may not coincide were clearly not in their minds, even in circumstances (like the present) where their reports happen to coincide.

So, the only possible argument is that it should be implied, as a matter of necessity or because the parties would testily and “of course” have agreed if anyone had raised the point, that a joint inspection leading to a common result would have the same effect as that provided by the clause. The judge did not expressly deal with this argument, although it was covered briefly before him. Mr Hill advanced it either on the basis that one must imply a separate clause to that effect, or on the basis that one must read into clause 30(c)(v) (and the three previous sub-clauses mutatis mutandis) after the words “jointly appointed Inspector” words such as “or to the common satisfaction of two inspectors [conducting a joint inspection], one appointed by each party”. I have some sympathy with this submission, but it faces the problems that clause 30 is very specific; that the suggested implication is seeking to expand its ambit; that there is certainly a conceptual and might, perhaps, be some practical difference between a jointly appointed expert, owing equal duties to both parties, and two separately appointed experts, each answerable only to his own principal; and that the application of the clause is capable of leading to certain anomalies (as demonstrated below) which might perhaps militate against too great a willingness to expand its ambit by implication. I prefer in the circumstances not to express any final view on the suggested implication, because there is, in my view, another reason why clause 30(c)(v) cannot assist Vitol.

The reason is one which the judge did not address in his judgment, although he mentioned it as a possible further point in post-judgment discussion. It relates once again to Vitol’s duty to provide cargo. When addressing clause 30, Mr Hill said that the clause showed how much importance was attached to a vessel presenting clean. There is force in this submission, in that clauses 30(c)(ii) and (iv) provide Vitol with an automatic right to cancel, in the event of a vessel tendering and being found dirty by “jointly appointed inspector”, even though there was no duty to present her at that time and her presentation dirty does not of itself involve any breach of contract, and even though time remains for her to clean and re-tender, perhaps even before the charter cancelling date. But the key to the present case must lie in the proper construction of clause 30(c)(v). That clause starts with the unexceptional proposition that the owner should indemnify the charterer for “costs and consequences as a result of the vessel not being clean to the satisfaction of jointly appointed Inspector”. Its initial part, therefore, recognises the relevance of causation. But it goes on, in apparently general terms, to provide that, if once a vessel has been tendered dirty and rejected by “jointly appointed Inspector”, then

The question is whether the absence of any express reference here to causation means that there is no qualification on clause 30(c)(v). Despite its unqualified language, Mr Hill was, in my view, right to accept that it cannot extend to circumstances of delay caused by a charterer’s failure to provide a cargo ready for loading. If the clause were read absolutely literally, some surprising results would follow. An owner whose vessel happened to tender dirty would find that neither laytime nor demurrage would run or accrue until connection of hoses, even though the charterer had no cargo at the time of rejection and the delay in connection of hoses was due to the lack of cargo. That may or may not be the present case, depending upon whether Reliance would have loaded the vessel on 4^th or 5^th December, had she been found clean on the inspection on 4^th December. But, when one bears in mind that the vessel was under no duty to present clean on 4^th December, or any time before she actually did present clean on 5^th December, it would also seem strange if the effect of clause 30(c)(v) were to prevent the running of laytime for the whole period from 6^th December 2000 to 2^nd January 2001, where Vitol had no cargo available for loading throughout that period.

Clause 30 is on any view, as Mr Hill accepted, a “rough and ready” clause. I do not consider that the provision under clause 30(c)(ii) of a right (in this case unexercised) to cancel following the rejection of the vessel on 4^th December (assuming that to have been by “jointly appointed inspector”) shows that the parties must have intended to exclude the running of laytime and demurrage, even though the actual reason for any delay after the vessel became ready to load was charterer’s own breach of charter. Nor is there any basis for thinking that clause 30(c)(v) was conceived with a view to protecting Vitol in the event that it or its supplier had or chose to perform other commitments, in the way which occurred in the present case (and about which Vitol protested to Reliance on 12^th December 2000). The emphasis on causation in the opening part of clause 30(c)(v) militates to my mind in favour of, rather than against, a conclusion that causation has some role to play in the operation of the latter part of clause 30(c)(v). But, however that may be, the presumption that charterparty exceptions to laytime do not protect against delay caused by the charterer’s failure to provide cargo (cf paragraph 11 above) justifies the conclusion that the clause cannot apply in circumstances such as those discussed above. That is sufficient to decide this aspect of the appeal. But I would add that, even if I had concluded that clause 30(c)(v) should be read as unqualifiedly as its apparent language, I do not consider that that could have assisted Vitol. Clause 30(c)(v) would prevent laytime and demurrage running, but there is no reason why Triton should not have an equivalent claim for breach by Vitol of its duty to provide cargo available for loading.

Clause 30(c)(v) is also silent about any qualification of its operation in circumstances where the connection of hoses and the operation of loading is prevented by other causes within charterer’s control (compare clause 6). Yet it can hardly be the position that Vitol’s fault in respects not relating to the provision of cargo could at one and the same time prevent connection of hoses for loading, suspend laytime and deprive Trition of any remedy in respect of the delay. Either clause 30(c)(v) must be read as subject to some further limitation; or, if the clause is read as preventing laytime and demurrage running, there seems scope for a claim by Triton for equivalent damages, based on an implied duty on Vitol’s part to cooperate to bring about the connection of hoses as soon as possible (cf mutatis mutandis the principle and citations mentioned in paragraph 28 below). It is however unnecessary to go further into this.

In the present case, Vitol was in breach of charter in failing to have cargo available for loading when or six hours after the vessel became ready to load at 22.00 hours on 5^th December 2000 or at any later time until 2^nd January 2001. In this situation, clause 30(c)(v) does not apply and cannot assist Vitol for the reasons given in paragraphs 24 and 25 above.

The principle is not in doubt. A convenient summary appears in Schofield on Laytime and Demurrage (4^th ed.) paragraph 4.17:

For present purposes, it matters not precisely how the principle is rationalised. The judge was unable to identify anything which could properly be regarded as either a breach of contract or relevant fault, and I agree. The vessel was bound to proceed to Sikka with all convenient despatch and present ready to load. But there was no plea and no basis for concluding that she failed to proceed with due despatch, or that the crew failed to do as much as they could have done during her voyage to clean her, or that she could with reasonable efforts have been made ready to load before 5^th December. She presented after the charter cancelling date, but the judge was correct to say that was not a breach, even in the light of the importance attached to clean presentation under clause 30. Presentation after the cancelling date merely gave Vitol a right to cancel which it chose not to exercise. Rejection by “jointly appointed inspector” under Clause 30 would have had a similar effect. All that happened was that the Nikmary gave an (ineffective) notice of readiness and presented before cleaning had been completed. I would agree with the judge that that too was not a breach. But, even if it were to be regarded as involving a breach or a fault, it caused no delay in loading. If it had not taken place at all, the vessel would have been engaged in cleaning her tanks, without any conceivable fault, until after Reliance’s December commitments crystallised and the vessel became doomed to wait for their fulfilment. The vessel’s presentation in a dirty state on 3^rd and 4^th December was at most a short-term irritant for Vitol, with no long-term consequences on the facts found by the judge.

I therefore consider that the judge was right to reject each of the bases on which Vitol submitted that laytime and demurrage did not run. Vitol was, no doubt, put in an awkward position, as a result of the unexpectedly late arrival of the Nikmary, but it chose to maintain the charter, in circumstances where Triton was neither in breach nor at fault in any material respect. Vitol was therefore obliged to continue to perform its part of the charter. No doubt Vitol maintained the charter for good commercial reasons, having regard to its desire to fulfil its sub-sale commitment and to uplift, for that purpose, product which Reliance was still willing to supply at some point. But, unless Vitol’s purchase arrangements ensured that it could meet its continuing charter commitments, Vitol thereby incurred a potential exposure towards Triton, which has in this case materialised. I would accordingly dismiss this appeal.

I agree.

I also agree.