Transpetrol Maritime Services Ltd v SJB (Marine Energy) BV

This is a tanker charterparty dispute by which the Claimant claims US $460,000 in demurrage and the Defendant Charterer counterclaims seeking damages of US$3,247,000 for breach of contract and/or misrepresentation. Each party, despite the legitimate length of its written submissions, claims, from different points of view, that this is a very simple case. The parties disagree about the terms and the interpretation of the charterparty, the nature and significance of “approvals” of tankers by major oil companies, about changes in the condition of the vessel before and during the charterparty and about a range of other matters relating to reliance, mitigation and loss.

The Claimant (“Owners”) is a company based in Brussels with its technical office in Asker, Norway. It manages and owns a fleet of some 14 vessels. The Defendant (“SJB”) a company based in Rotterdam is a trader in petroleum products mainly for intermediate refinery feedstocks which has been in business since 1992. On 6 June 2007 SJB voyage chartered MT “Rowan” (“the vessel”) for the carriage of fuel and/or vacuum gas oil (“VGO”) from, essentially, 1-2 safe ports/STS Black Sea (with charterers option to top up or discharge or reload at Antwerp) to amongst others, 1-2 safe ports/STS in the US Gulf. The vessel loaded cargo at Odessa and Batumi before passing through the Turkish Straits. SJB exercised its option to discharge and reload at Antwerp. During the voyage events occurred which gave rise to Owners’ claims for demurrage and port costs. As there was a measure of agreement about demurrage until shortly before trial and this is a much smaller claim than that made by SJB I will, like the parties, deal with the counterclaim first. SJB says that as a result of what emerged and was disclosed following an inspection at Antwerp the vessel lost the benefit of any oil major approvals it had and as a result it was unable to sell the cargo on satisfactory terms. Eventually 200,000 barrels of the cargo of VGO were discharged into tanks at Houston leaving 100,000 barrels to be discharged into a tank at Port Allen. SJB says that but for Owners breaches it would have sold the cargo to Shell for $3,246,592 but instead realised only $1,185,460.

This case was tried between 11 and 20 October. The Owners called six witnesses of fact. These were: Ms Claire van den Bossche, Ms Christelle Hubert and Mr Vincent Taymans from the Brussels Office; and Mr Kai Bjorkelund and Mr Paal Stenberg from the Asker Office. They also called Mr Michael Brooks, a solicitor employed by the Owners Defence Association based in Oslo. SJB relied on Mr Martinus Vallenga who was the trader mainly involved in the disputed transaction. Mr Fintan Cullen and Mr Colin Pearce gave expert evidence about oil major approvals on behalf of the Owners and SJB; Mr Colin Allcard and Ms Catherine Jago dealt with oil trading and Mr Alex Sinclair and Mr William Boyd addressed questions of classification and Naval architecture. All the witnesses of fact and the experts gave honest evidence and were seeking to assist the court.

This action was brought in September 2008. Despite having two years to prepare the parties left the case in disarray until immediately before the trial. Applications for extensive disclosure, wide ranging amendment and the withdrawal of admissions were brought before the court at the last minute as is apparent from the Orders of Mr Justice Hamblen and me dated 6 and 28 September and 5 October 2010. This inevitably led to some broad, if not rough, justice in what was permitted by the court and to unnecessary pressure and cost for both parties.

I will deal first with events leading up to the fixing of the charterparty and with the disputes about the terms and construction of that contract before turning to the issues that arose during the vessel’s voyage.

The vessel was built in 1991 and went into dry dock for updating and repair in September 2006. Following a survey she was held to be in Class.

Oil majors operate a system of vetting and approvals to ensure that the vessels they use or trade or buy cargos from are of satisfactory quality. The companies pool their inspection reports made for the purposes of approvals through a database know as SIRE. The inspections cover the same or similar matters for all companies. A report is sent to Owners who may respond with comments. When Owners provide comments these are incorporated in the SIRE report which is then available for all SIRE members to read. Vetting involves more than simply looking at the SIRE report but that report is a major factor in any decision. It became clear from the evidence that the owners and operators of tankers seek and collect written approvals from oil majors and like to have as many as possible, preferably from the top names. Approvals greatly help marketing.

Despite the cautious and conditional terms in which they tend to be expressed the letters obtained by owners of vessels are known as approval letters or by a similar description. Owners say that they had obtained five approvals by the time of the charter as follows.

On 3 January 2007 Statoil conducted a SIRE inspection of the vessel in Turkey and on 26 January 2007 Statoil wrote to Owners in terms which Owners contend was an approval of the vessel for 12 months.

On 14 February 2007 the vessel was detained by Port State Control in Augusta, Italy. 25 deficiencies were identified and it appears that by the time the vessel was released on 19 February all but two had been corrected. These two were it seems put right within a further two weeks. On 21 February Class imposed a condition of Class, number 29, requiring that an unscheduled survey be held for the maintenance of Class, by April 2007.

On 27 February 2007 Motor Oil Hellas (“MOH”) a Greek oil major, (although less of a “major” than others), conducted a SIRE inspection in Greece. This led to a report incorporating Owners’ comment. On 13 March 2007 MOH wrote in terms which Owners say was an approval. On 20 March 2007 BP conducted a SIRE inspection. This too led to Owners’ comments. BP did not at that point approve the vessel and posed questions.

On 28 March Owners prepared a circular dealing with the problems identified at Augusta and the corrective action taken. Mr Stenberg of Owners says he sent this to Statoil but there is no record of that having been done. On 28 March Class issued their Condition Assessment Programme report and certificate for the hull following the dry docking the previous year. On that day there was a SIRE inspection on behalf of Lukoil. The report referred to outstanding problems and Owners responded that all deficiencies had been corrected.

On 4 April Class surveyed the vessel and deleted the condition of Class. On that day Owners asked Chevron for approval. Chevron declined to inspect until “approximately June 2007”. On 13 April Lukoil wrote in terms which the Owners say is an approval. On 10 April Owners asked Exxon to approve the vessel. Exxon replied that there was a hold on the vessel because of what had happened at Augusta. Owners brought Exxon up to date and as a result on 20 April Exxon wrote in terms, based on the Lukoil SIRE report, that Owners say was an approval. Following exchanges and provision of further information BP wrote to Owners on 31 May giving what Owners say was an approval.

In May 2007 the vessel was coming free and Ms Van den Bossche of Owners circulated details in the market. Details of the vessel’s description, location and availability dates were circulated to brokers and to potential charterers including a broker specialising in VGO at Ocean Shipbrokers. At this time Mr Vellenga of charterers was looking to charter a vessel to collect gasoline from Odessa and VGO at Batumi with a view to acquiring and selling VGO to refineries or oil majors on the US Gulf Coast.

Once the parties were in contact, negotiation was between Mr Ebbesen of Ocean Shipbrokers and Ms Van den Bossche of Owners. In an email at 17:38 on 5 June 2007 Ms Van den Bossche wrote amongst other things:

“Good afternoon Simen,

Cargo Quantity: Min 41,000MTS charterers option upto full cargo no D/F C/A PMQS Max SG 1.025 at loaded temp.

Grades: ½ grades FO and/or VGO

Pls add “If VGO, no cleaning required; vsl to load on top.”

Segregation: Maximum two, within vessels natural segregation. Pls add “and always within vessel’s stability capabilities”.

-

Itinerary: vsl ppt off Cyprus

-

L3C: FO/FO/FO

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- Approvals:

To the best of Owners knowledge vessel is approved by:

Moh (exp 26/08/07), statoil (exp 02/01/2008), Lukoil (exp 27.03.2008), exxon exp 26.09.2007 (basis lukoil SIRE), BP (exp 19.03.2008)

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Turkish Straits Clause:

*notwithstanding anything elsewhere herein contained, if the vessel commences the ballast voyage in time to arrive at the loadport within the cancelling date but is delayed because of the traffic regulations through the turkish straits north-bound such that vessel may not arrive by the cancelling date charterer’s option to cancel as provided

Elsewhere herein can not be exercised. Owners to notify charterers of the date and time that they expect the vessel to be ready to load based on the advisory position given by the traffic control.

*any delay in passing the turkish straits south bound in excess of 24 hours (including the actual transit time) to count as laytime or time on demurrage if vessel on demurrage. Supporting documents to follow.

- vessel to maintain loaded temperature but maximum 135 degrees fahrenheit, maximum loaded temperature 165 degrees fahrenheit.”

Owners say that this message is inadmissible for the purposes of construction a point I will turn to shortly. SJB relies on the email for its misrepresentation case but in cross-examination Mr Vellenga (to whom the alleged misrepresentation was made) accepted that he had never seen it because Mr Ebbesen had not passed it on.

It is agreed that the contractual recap is that sent by Mr Gerden of Ocean Shipwreckers to Owners at 16:06 on 6 June 2007. The email runs to six printed pages and its contents must of course be read in context and against the entirety of the message. I set out only the brief provisions at the heart of the dispute.

“Vessel info” includes “TBOOK WOG VSL IS APPROVED BY: BP/LITASCO/STATOIL – EXXON VIA SIRE”.

Under “terms” the email states: “VITOL VOYAGE CHARTERING TERMS – AMENDED 1^ST NOVEMBER 1999”. The email goes on to refer to what are individual numbered Vitol terms modifying some and deleting others in ways I will mention shortly. In the ordinary way clause 18 Vitol reads:-

“18.

Oil companies approvals clause

Owner warrants that the vessel is approved by the following companies and will remain so throughout the duration of this Charterparty (owner(s) to advise, including inspection dates and expiry dates)”.

The email says this next to the reference to clause 18:-

“TBOOK VSL APPROVED BY: TBOOK VSL APPROVED BY: BP/EXXON/LUKOIL/STATOIL/MOH”.

It is common ground that “Tbook” means “to the best of Owners knowledge” and that “WOG” means “without guarantee”.

No further contractual document was prepared.

Mr Raphael for Owners says that the effect of the wording in the recap is to “overwrite” and replace the wording in the standard Vitol clause so that 18 provides solely what is set out in the recap itself. He also argues that the acronym “WOG” applies to clause 18. Thus there is simply an indication without a contractual commitment that the five listed approvals are in place at the outset of the charter. Mr Cogley for SJB argues that Vitol clause 18 stands but qualified by “Tbook”.

Mr Raphael argues for his construction by taking the words, including WOG, under the description of the vessel and applying those to 18 as well. He says that this provision on the first page of the recap is the essence of the contract, the rest merely its working out. The added words stand alone with the printed 18. It is inconsistent with a continuing warranty for it to be limited by “Tbook WOG” or simply “Tbook”. It is a statement which can only be given once. The repeated introductory works in the typed addition indicate that the addition replaces not supplements the printed 18. Further against a commercial background where approvals could be terminated at any point by the relevant oil major and where periodical approvals did not guarantee definite approval for any particular voyage, no reasonable owner would give such a warranty. He also submits that textual points, such as the absence of an express statement that the original wording of 18 should be deleted, carry little weight. The reason why 18, unlike for example 16, makes no express reference to the clause being deleted is because 16 substituted nothing in its place.

Mr Cogley supports his construction first by saying that it is clear that the words in the recap next to clause 18 were additions to the standard 18 and not a replacement of the entirety. There is no express reference to deletion at 18 but there is at clauses 6, 22, 25, 33 and 38. He also relies upon the fact that the provision of approval details, not just of four oil majors but of all five companies with their expiry dates by Owners in the email of 5 June at 17:38 can only be the details required to put into vitol 18. There would be no other reason for providing that information. That evidence is admissible because it goes not to what the contract means but to what the words of the clause actually are.

This court often has to decide the meaning of contracts put together by relatively junior business people, without legal training and under pressure of timing and events, who use loosely relatively complex contract forms. In this case, as I see it, the parties were adding to not replacing a standard term. Looking at the words used, in the contractual context, I prefer the meaning put forward by Mr Cogley. When addressing 18 the parties are agreeing how their bargain is to operate in regard to the subject matter of the clause. I do not see that particular weight should be given to earlier clauses such as the description of the vessel- particularly when the approvals listed in the earlier clause differ from what is at 18 and what I take to have been in the parties minds in that regard. I accept however that the 17.38 message on 5 June is inadmissible for purposes of construction and in any event not conclusive as to what the terms of the contract were- the intention said to be present at that point may have changed before the deal was done. (I do this despite Mr Raphael relying on this passage himself in support of his construction as one sees from paragraph 32 of his Opening Submissions). For a similar reason I do not consider that the information supplied, apparently for insertion in Clause 18, is admissible. If WOG was to qualify 18 the text would have made this clear. Similarly, if 18 was to be deleted or replaced this would have been made clear as it was with other clauses. Mr Raphael’s distinctions between one clause and another are ingenious but, as I see it, of no weight. I do not see that a continuing warranty qualified by Tbook is unworkable and one can think of similar provisions in other areas of commercial law which place a party under a continued obligation throughout the life of much longer agreements. In his closing submissions Mr Raphael attaches significance to the repetition of “Tbook approved by” in the recap but I do not. The repetition seems to me to add nothing. One is also cautious about accepting arguments that a particular construction fails because it is commercially unrealistic. People daily make what are in retrospect bad bargains and individual provisions are often balanced by other clauses tipping back the advantage and by the attractions of the deal as a whole. In reaching this view I disregard the inadmissible evidence which both sides, at the outset, had sought to rely upon.

I have referred only briefly on this issue to the evidence of Ms Van den Bossche and Ms Hubert because much of their testimony was inadmissible and I am concerned primarily with what the parties wrote. Both were clearly honest, Ms Van den Bossche having left the company, but their recollection of these points of detail and of what led to them more than three years ago was understandably imperfect and to a degree shaped by a defensive concern about the whole matter and by the unfamiliar experience of giving evidence in a foreign court and not in their first language.

Having established what the terms of the contract were the next issue is the meaning of those terms and in particular “Tbook” and “approved”.

SJB contended at the outset that the meaning of “approvals” or “approved” was a matter of plain and ordinary English which, when applied to the letters with all their reservations and conditions, revealed that Owners had obtained no approvals at all. However a consensus emerged in evidence, particularly from what was said by Mr Cullen and Mr Pearce the experts in this area and by Mr Stenberg and by Mr Vellenga to the effect that “approved” was used in the market in 2007 to mean “acceptable to” oil majors who might or might not, when the prospect of a real transaction arose, decide to approve that vessel for use or as a suitable carrier of cargo to it. This means that it is unnecessary to examine closely the considerable amount of necessarily somewhat imprecise material and evidence on that point.

It seems clear from this evidence that it is not the practice of oil majors to grant approvals as such in advance. Indeed letters from the companies relied upon as approvals will generally state that no such approval has been granted and should not be assumed. This is the result of reluctance by oil majors to commit themselves about a vessel in advance following the problems caused by pollution incidents involving the ERICA in 1999 and the PRESTIGE in 2002. A report that these vessels had been “approved” by oil majors had led to damaging publicity. Both Mr Cullen and Mr Pearce agreed that the approval letters relied on by Owners in this case were usual for the oil majors concerned, that some in the industry regarded them as approval letters and some would characterise them instead as indicating that vessels were “acceptable to” or “not unacceptable to” the oil majors. They also agreed that express approvals were given only for specific voyages not for a period of time. They both gave honest opinions about this issue drawn from their own experience and that of those to whom they had spoken. I agree with Mr Cullen that “the system is more vague than it used to be”.

Mr Cullen went on to express the view that once granted an approval can be lost in one of two ways. The approval can be lost once the time period for which it is given expires. It may also be lost if in response to a request for an approval from a specific oil major, and after a review, the owner is notified that the vessel has been rejected and is no longer approved. In contrast Mr Pearce took the view that an approval would be lost automatically as and when the vessel fell into a condition which would lead a fresh application for approval to fail. Similarly Mr Stenberg accepted in cross-examination that the STATOIL approval would be lost if an owner did not report a potentially invalidating occurrence and the oil company came to hear of it.

Mr Raphael points to the apparent use of the word “approval” in the manner on which he relies in two reported cases of this Court (The ELLI and the FRIXOS [2008] 1Lloyd’s Rep 262 and Gas Natural-v-Methane Services [2009] EWHC 2298) and also by very experienced shipping arbitrators. Mr Raphael points to the fact that the bulk of the clauses concluded by SJB in other transactions in early 2007 and disclosed in the litigation used the term “approval”. The five letters obtained by Owners in this case do not on their face read like letters of approval. Part of a message from Chevron 4 April 2007, postponing an approval, is typical of their approach :-

“We will defer inspection of the vessel until approximately June 2007. If necessary, we will refer to Statoil ASA SIRE report dated 3 January 2007.

However please note that SIRE reports are used on a case-by-case basis only when required. Chevron does not issue approvals in advance. That is, each time a vessel is considered by us for charter or third party use, it must be cleared. Approval or disapproval at that time will be based on inspection information, as well as other information; such as, but not limited to, commercial alternatives, vast experience with the vessel and its operation, financial stability of the owner, age, the vessel, etc.”

The Lukoil approval contains this language:-

“We have now received sufficient information with regard to this vessel and will not normally require re-inspecting the vessel for a 12 month period from the date of the inspection.

Please note, however, that this letter does not constitute a blanket approval of the vessel for LUKOIL-LITASCO business or for visits to Lukoil terminals or facilities. The vessel will be screened by us on each occasion it is tended for Lukoil/Litasco business or intends to visit one of our terminals or facilities.

Amongst other criteria, our decision will be based on the continued satisfactory performance of the vessel and any feedback that we may receive.” (Owners do not see the SIRE reports).

Despite the wording of the letters the evidence from both sides was virtually unanimous that the word “approval” in this context was taken, at least in 2007, to mean not literally “approved by” but “acceptable to” and subject to further approval. Although it seems that some in the market prefer not to use the expression ‘approval letter’ there is no doubt that the word ‘approved’ in the clause is referring to such letters. Notwithstanding that position Mr Cogley’s primary argument is that “approved” is an ordinary English word and the owner therefore warrants that the vessel has indeed been approved and will continue in such status throughout the charterparty. That argument is it seems to me doomed by the overwhelming evidence that notwithstanding the potential risk for confusion particularly amongst outsiders the letters in this case would all be taken to constitute approval letters. Mr Vellenga seemed to accept that. I certainly do and the word ‘approved’ in the warranty must be read accordingly.

Mr Raphael’s primary submission that the relevant clause includes not only Tbook but also WOG would, if accepted, mean, as a matter of law, that there was no warranty at all with misrepresentation as the only potential remedy. Even then Owners would only be required to have a genuine belief, at the time of fixing, in the statement that was being made – see, for example, The Lendoudis Evangelos II [1997] 2 Lloyd’s Rep 404. For the reasons I have given however the clause is, as I see it, limited to “Tbook”. Mr Raphael argues that on this approach Owners are committing only that the relevant fact is true to the best of their knowledge. So if, so far as Owners know, there is an approval, when in fact there is not, that is no breach. The Tbook statement is about the approvals and not the underlying facts. Thus if Owners knew the vessel had suffered a bump and, objectively that bump removed the approval, Owners would not be in breach unless they knew both about the bump and also that its effect would be to remove the approval. Mr Raphael argues that “at best” cannot take any obligation beyond Owners knowledge and means no more than “as far as I know”.

Mr Cogley contends that Tbook presupposes that the owners have some knowledge and that that knowledge is the best knowledge open to them. In his initial submissions he argued that the expression connotes that Owners have, at the very least, sought to ascertain the factual position as at a fixed period. Owners cannot, by using that acronym, then suggest that they have complied by making no enquiries about what was happening on the ship.

As I see it the word “best” cannot take an obligation beyond the extent of Owners knowledge but it does mean that they are stuck with what they, as a company, actually knew, as opposed to what a particular employee happened to recall at any one time. The words do not require Owners to make enquiries additional to those which would ordinarily be made in the course of their business.

I do not accept the validity of the evidence of either expert about when approvals are lost. There seems no evidence other than conjecture and reminiscence for claiming either that an adverse event somehow automatically terminates an approval letter expressed to continue for a fixed period or for contending that an approval continues to have practical existence after some occurrence which will inevitably prevent approval of the vessel when it is offered to an oil major. I do not consider that letters of this kind are usefully analysed in this way. The answer, as I see it, must lie in the construction of the words in the clause set in context.

Mr Raphael rightly points out that the clause relates to approval by oil majors and is not a warranty about the state of the vessel as such. He also contends that any attempt to widen the approvals clause to be some form of broader warranty of the condition of the vessel going above the usual warranty of seaworthiness is inconsistent with the structure of this charterparty as a whole and indeed with most charterparties. He points out that things go wrong with seaworthy vessels post fixing without Owners falling under liability and that Mr Vellenga’s evidence about how he was entitled to a “freely tradable” ship showed not only his comparative inexperience in this area but also a misunderstanding about the basic legal structure. Mr Cogley responds that the question of unseaworthiness is irrelevant. The requirements of oil majors will often require aspects of the vessel to be of a standard higher than that of seaworthiness. It is not the physical state of the vessel but its acceptability to oil major purchasers of cargo which is the issue. He argues as part of his secondary case, that at the date of the charterparty the vessel had to be acceptable to the five oil majors referred to in the clause and continue to be so throughout the life of a relatively short voyage. The clause was not onerous in context. SJB was paying a high rate and had, in return, been given the terms on which a party in a strong bargaining position such as Vitol is able to demand.

As I see it “approved” for the purpose of the clause means that the approval letters specified must be in place throughout the charter. At any time when offered to cargo buyers the vessel must not be in a state which to the knowledge of Owners would remove the comfort of the warranted approvals to the potential purchaser of cargo. For example there will be a breach of warranty if some event occurs which, to the knowledge of Owners, would if known to the issuer of the approval letter, cause it to withdraw or cancel that approval. The fact that the commitment undertaken by the writers of the letters is so limited is, as I see it, beside the point.

SJB contends that even if the five letters referred to in the charterparty constituted approvals they lost currency both because essential conditions set out in them were not fulfilled at the time of fixing and also as a result of subsequent events. I will deal with the first period briefly as the real claim does not relate as I see it to this period. Further successful reliance on events before the charterparty involves taking too literal an approach to what the market expects these letters to amount to.

The STATOIL letter of 26 January 2007 required Transpetrol to advise Statoil “immediately” if certain circumstances arose including “any other matter that may affect or jeopardise the fully and efficient use of the vessel”. SJB also relies on the letter having as a condition precedent that there was no change in the “state or condition” of the vessel beyond normal wear and tear. SJB relies on the PSC detention at Augusta in February 2007, the imposition of Class Condition 29, the likelihood of cracks between the cargo and ballast tanks, and the refusal to approve by Chevron before fixing. The letter of 13 March 2007 from MOH was based on “continued satisfactory performance of the vessel, the results of the Port State Control Inspections and any feedback we may receive from our or any other terminal”. The Lukoil letter of 13 April 2007 is subject to “the continued satisfactory performance of the vessel ...”.

SJB claims that as a result none of the approvals were in place by the time of the fixing on 6 June 2007. It places particular emphasis on the position of Statoil. As a result the court received evidence on that issue. Mr Stenberg was cross-examined about his dealings with Statoil and in particular about whether a memo about Augusta dated 28 March 2007 actually went to Statoil. Materials obtained by SJB from Statoil address the question of what status the approval letters had. Owners responded to this by putting in an unsigned statement of Mr Ragnar Halverson, formerly of Statoil, about which their solicitor Mr Brooks gave evidence. Mr Halvorsen wisely declined to give evidence about matters of very limited relevance, understandably preferring “to go fishing on the fjord and sit in (my) armchair with (my) wife in the evenings”.

Given my findings about the crack to which I will refer shortly and the similar views of Mr Pearce and Mr Cullen about the events at Augusta this aspect of the claim is unpromising but it is unnecessary for me to reach conclusions. The substance of the claim, damages, relates to what is alleged to have resulted from breaches of warranty occurring when and after the vessel visited Antwerp at the end of June 2007.

Notice of readiness was given at Antwerp on 30 June and between 2 and 7 July cargo was discharged, further cargo loaded and the Class annual survey carried out. At the same time Shell and Conoco SIRE inspections were conducted. On 4 and 5 July a Class Surveyor made several visits to the vessel and required it to go to a lay-by berth for further inspections and repairs. On 4 July Mr Vellenga emailed both the vessel and Owners because he learned that “something seems to be wrong with the vessel that may limit the MT ROWAN in performing her obligations under the CP – will cause extra cost and waiting times ...”. He received a message back the following day “as communicated to brokers yesterday early evening it was noticed during an inspection that the low suction sea-chest valve needed repair prior sailing. VSJ has shifted overnight to a lay-by berth and Owners expect to finish repairs around 16:00 today ... vessel has performed her obligations under the CP perfectly fine; even more so ...”. Later that day Ms Van Den Bossche informed SJB’s brokers “we were just being informed that Class surveyor has agreed to postpone repairs to the sea-chest value until completion of discharging of this current voyage”. This had followed the move to the lay-by berth and inspection by divers. On the same day SJB provisionally booked another vessel to take on the transatlantic voyage if ROWAN was not in a position to do so. Lloyd’s Register then issued an interim certificate permitting the sea-chest valve to be dealt with at the next port only, it seems, because a dry dock was not available at Antwerp. The annual survey was treated as part-held and a condition of Class 030 imposed. On 6 July the vessel left Antwerp and SJB emailed Owners, via the brokers, “One more thing, understood the vessel has been allowed by Class Surveyor to postpone repairs until completion of this TA voyage. The above is fine with us under the following two conditions:

Owners received SIRE reports from Conoco on 6 July and from Shell on 9 July. A consequence of the imposition of condition on Class was removal of the UMS (unmanned machinery space) notation for the vessel which then required 24 hours manning of the engine room. Mr Vellenga says that on 10 July Shell had agreed by telephone to buy the cargo subject to vetting at a price of WTI + $13 per barrel and I discuss this further below. On 11 July Mr Vellenga reported to colleagues that Chevron (who he described as “very picky”) had declined to deal with the vessel and that Shell would not approve it because of the latest SIRE report and answers from Owners not getting in on time. Mr Vellenga reported his concern to brokers. On 12 July 2007 Owners reported on the two SIRE inspections. Mr Vellenga says that he by then had complete specifications for the cargo and had started marketing in earnest. On 13 July Owners reported that the deficiency with the high sea chest suction valve had been rectified by the crew. It was said that the problem was a defective fork and sleeve. The actuator was repaired and tested and all was found to be in good working order. Owners said that they would call in the Class Surveyor for deletion of Condition of Class 030. On that day SJB sought from Transpetrol confirmation that Shell had approved the vessel on the basis of the SIRE report.

Owners responded that they did not have any control over Shell’s vetting decision, explaining the procedure and saying that it could easily take a week before they heard from Shell. Mr Vellenga reported on the 17 July that despite usually taking a week to answer Shell vetting had responded within a day to say that the vessel was not acceptable. Since the Class Surveyor demanded repairs to be carried out after discharge Shell would not take the vessel before that discharge. Mr Vellenga believed that as a result Shell had on 16 July declined to buy from SJB and obtained their requirements elsewhere. At that point, as Mr Vellenga reported in an email to his broker, his options were “pre-sell now to a trader that is not choosy on vessels and who will put it into storage”, “pre-sell now to an end-user that is picky and deliver by barge” and “see if I can put it somewhere in storage that is in my name”. On 16 July Mr Vellenga received from Melanie Stern-Rarich of Star Supply information that Shell (or rather its US arm STUSCO) had bought a cargo of VGO broadly equivalent (250 barrels rather than 285) to those which SJB had for sale. There were further email exchanges by which SJB reiterated that the problem with Shell had been the Class Survey issue at Antwerp. Owners responded through Ms Van Den Bossche who explained that the Shell vetting inspector had submitted his report to the Shell vetting office on 9 July and on 11 July Owners had logged their answers. She was not surprised that the vessel had been rejected by Shell because the vessel had not previously been listed as approved by Shell. She pointed out that previous approvals by other companies were “certainly no guarantee that Shell, or any other oil major for that matter, will automatically accept the ship through the SIRE system. All oil majors are screening vessels on an independent and case by case basis when required, they do not issue blanket approvals in advance”. That was no doubt correct so far as it went- Shell was not one of the five companies listed as approving the vessel- but it did not address the apparent link between the problems at Antwerp and Shell’s unwillingness to trade.

On 20 July 2007 a representative of Valero informed Ms Stern-Rarich that the vessel was not approved for Valero on grounds rated to prior experience, the PSC detention in February 2006 and the SIRE inspection dated 4 July. Mr Vellenga recalls that around this time Marathon had also rejected the cargo. I accept his evidence for reasons given below and he was not challenged on this issue.

There has been a considerable amount of conjecture and of expert evidence about which majors would or would not have rejected the vessel in the light of what had happened at Antwerp. There is however no serious challenge to SJB’s claim that as a result of the spreading of intelligence and gossip within the market it would quickly have been well known that the vessel had a problem and that SJB’s ability to sell cargo at a conventional price would as a result be considerably limited. Further, I do not think it useful to examine closely the significance of the problems revealed at Antwerp. It is self-evident from the SIRE inspections at Antwerp that no oil major would on the basis of what then was known have written a letter in terms recognisable as an approval letter in this case. The Shell report had 33 adverse comments. The Conoco report had more than 20. Mr Cullen, the Owners’ expert accepted, albeit after some hesitation, that BP would not have written an approval letter had it been aware of the events at Antwerp.

Considerable attention was directed to an issue which seems to me of very limited relevance to the main questions in dispute. Some time shortly before 20 July 2007 the crew discovered a crack “between COT and WBT 4P” and, according to Owners, “the crack has been temporarily repaired and the plan is to carry out a permanent repair after discharging Houston”. Owners sought a condition of Class for repairs. SJB’s case as regards the crack is first that it was of considerable significance and secondly that the fact that it was discovered by the crew shortly before 20 July inevitably meant that the problem arose well before that. The issue was debated in evidence by two impressive naval architects, Mr William Boyd and Mr Alex Sinclair.

Mr Boyd thought it possible that the fracture between COT 7C and WBT 4P could have existed before loading at Odessa. Mr Sinclair describes that as a truism because all such cracks develop well before they are capable of being discovered by the human eye. Mr Boyd’s view was that this crack in particular and others was serious enough to be dealt with at the earliest opportunity, in the view of Class, rather than at operational convenience. They were therefore defects of significance. Mr Sinclair was slightly less concerned about the significance of the cracks. As a result of cross-examination of both witnesses I am inclined to the view that Mr Boyd’s assessment of the significance of the cracks was to be preferred but that Mr Sinclair was probably correct in his assessment that the cracks would not have been noticeable much before they were seen by a member of the crew. His view was supported by the evidence of Mr Stenberg, in charge of vetting at Owners, who has practical experience at sea on tankers. Mr Stenberg was in some respects a combatative witness keen to protect the interests of his company and occasionally prone to insist on the accuracy of broad generalisations. But he was convincing on operational matters. Further commonsense supports his view that if the crack had been significant at Antwerp it would have been noticed and there would have been a noticeable smell and the matter identified during hydro carbon testing. In forming these views I reemphasise that both experts were serious professionals and the differences between them were slight. I see no purpose in further investigating the crack. On balance it seems to me unlikely that it occurred in more than a minimal sense before the charterparty. Further the relevance of the point to SJB’s case is limited, given the views I have formed about construction, as one sees from the absence of any reference to it in Mr Cogley’s written closing submissions.

Before turning to the competing claims about the marketing and sale of the cargo and related matters such as mitigation I mention the evidence of Mr Vellenga as what he says is the only direct factual evidence about these matters. Mr Vellenga seemed to me a witness of very high quality. He is a highly intelligent man. As he acknowledges, in June 2007 he was new to oil trading although he had some years experience in the wider oil industry in the fields of finance, commerce and business development. His first witness statement was poorly drafted and contains errors. In live evidence however Mr Vellenga was very credible and came over as totally honest and frank. Thus at the outset of his evidence he was concerned to correct and apologise for matters which had appeared in his statement which he now saw to be inaccurate as a result of what had been drawn to his attention by others, including Owners. He was a witness who had a good answer for virtually everything without sounding like one of those people who always has the answer for everything. When it was put to him in cross-examination that he might be mistaken about matters he readily accepted this where appropriate. When it was suggested to him that his opinion about a matter was not shared by the Claimant’s expert he readily deferred to the other witnesses’ greater expertise. His memory was excellent, no doubt partly as a result of having been at the centre of stressful events early in his oil trading career. When his recollection of a telephone conference call involving Mr Crawford of LBC, the company with tanks in Texas, on 6 June 2007 was challenged Mr Vellenga insisted that it had taken place and believed that a transcript must exist. I was not surprised that the transcript confirming the conversation was produced the next day. While Mr Vellenga has strong feelings about SJB having, as he sees it, been let down, he seemed unusually adept at separating his feelings from his obligation to give a true and accurate account of events. Mr Vellenga readily made admissions which a man of his intelligence and involvement in this case would have known were against his company’s interest. Thus he readily accepted that he had not seen the email which was at the heart of SJB’s misrepresentation case. It would have been easy for a witness to convince himself that he had indeed seen it. He made concessions when questioned about what he was looking for in terms of the approvals at the heart of this case. Mr Vellenga accepted, contrary to SJB’s primary case, that the letters upon which owners relied, were what, in the industry, would be described as approval letters.

It follows that where Mr Vellenga’s recollections are supported by other material and by the documents I, of course, accept the truth of what he says. I also accept the truth of what he says about other matters of fact even where relevant material either does not exist or does but is equivocal.

Mr Vellenga said that when fixing the vessel SJB wanted to have the option of selling the cargo to a number of potential purchasers principally ex-ship but also from shore tanks in Houston, a contract for which he retained as a back up. Mr Vellenga wanted to sell the cargo on the United States Gulf Coast as one sees from the email in which he accepted that the vessel could leave Antwerp provided amongst other things “there will be no negative impact on vetting prospects of our potential USA customers”. In securing this objective Mr Vellenga clearly had in mind the significance of the approvals accompanying the charterparty. This is well illustrated by the following passage from the transcript at page 59 on Day 4. It was put to Mr Vellenga that he was not really relying on the “specificities of the Tbook statement at all”. He said this:

“A. No that is over simplification. If I want to sell a cargo, the ship is cleared or vetted or however you want to call it, so the buying company will look at the vessel and check whether it’s good or not good. The warranties that is an owner has by the periodic – the periodic approvals, if you call them that, erm, that is between owner and the form that gives it but in order to get a ship somewhere to get it cleared, you need a different thing which is the clearance itself and if a ship has good periodic approvals, it tells me – and from good companies – it tells me that the ship is in a good – the ship, the crew, the management, is in a good state so then it is more than likely, close to a certainty, that my potential buyer will clear that vessel and then the potential buyer can be in the Tbook or it can not be in the Tbook, that’s basically irrelevant because if the ship is good, they will clear it. If the company that I sell it to is in the Tbook, they will still do the clearing. They will not fall back to the periodic approval that they are free from the effort of checking the ship.

Q.

So it does not really matter who is in the Tbook?

A.

It does, because if you have only MOH and some small – smaller refineries in, they have a lower standard of the approval letter whereas the BPs, Exxons, Chevrons, they have higher standards.

Q.

The reality is that your approach to the Tbook warranty is you just wanted to see some decent names and that gave you a general reassurance?

A.

That’s for the general reassurance. I also wanted a specific reassurance that those approvals would remain in place with the result that that implies that the ship remains – the ship itself remains good, because if it doesn’t remain good then the periodic approvals get lost.”

Miss Jago, SJB’s expert, accepted that when a vessel has approvals from some majors there is a “calculated risk” but every chance that, all things being equal, you will get the approval from those other majors from whom approval has not been sought. There is a lot of similarity in the approach of the major companies “the difference comes sometimes on border-line cases”. This seemed to me a balanced and accurate view.

Mr Vellenga said that he tried to sell the cargo to Valero, Conoco, Marathon and Chevron, each on the basis that they would purchase the cargo afloat but this was not possible because it became “well known that the ship was rejected by Shell/STUSCO and the traders did not want to get involved in a troubled ship”. It was suggested that Mr Vellenga had delayed in selling the cargo in some way to play the market. I refer to this when addressing mitigation of damage.

Mr Vellenga gave evidence that but for the approval problem which arose he would have been able to sell the cargo to Shell at a price of West Texas Intermediate (“WTI”) plus $13/bbl. Mr Vellenga’s evidence is supported to a degree by the records of his exchanges with Melanie Stern-Rarich in that a deal was done at that price and he was of the view that Shell had accepted his offer subject only to vessel approval. No documents directly support Mr Vellenga’s perception of what STUSCO had agreed. Thus there is no written contract. Further his personal computer was lost later and there are no records of phone conversations as, being on holiday, he used a mobile. The records that are available support his account to some degree and are consistent with it. Shell made no purchases while they were checking out the vessel between 10 and 13 July and on the next working day they bought a similar volume of VGO from Valero. There is evidence that the price of any sale if concluded would have been around +13. I also accept the analysis of Ms Jago.

Ms Catherine Jago was SJB’s expert witness in the field of oil trading. She has 28 years experience of the trading and pricing side of the oil and energy industry working for BP where she was for a time involved with vessel vetting, as a broker, as a trader and writing and lecturing extensively in this and related fields. She was a witness of wide experience, high intelligence and appropriate detachment. She rightly declined to give views about matters outside her expertise and was cautious with her opinions about issues on the edge of it. On the question of how close SJB was to a deal with STUSCO at a price of WTI +13 she concludes that a sale was in practical terms achieved subject to the approval of Shell’s vetting department in the afternoon of 10 July. She relies on her evaluation of a sequence of events summarised between paragraphs 6.7 and 6.22 of her first report.

Overall it is clear that Shell either agreed in principle to buy the cargo subject to the condition of checking out the vessel or would have so agreed once the vessel was approved. Shell withdrew because of what had happened to the vessel at Antwerp. As no enforceable contract was entered into there remains a possibility that Shell might have withdrawn for some new unexpected reason or that SJB might have had to accept a slightly lower price. On balance I find that STUSCO would have purchased this cargo although not necessarily, since the transaction never came to a conclusion, at the price that Mr Vellenga was hoping for.

In a late amendment to their pleading brought about by the initiative of their expert Mr Allcard, Owners raised the question of the quality of the cargo as being relevant to Shell’s willingness to purchase and to the amount of any loss. Mr Allcard studied polymer technology at university and then worked for some 30 years with Shell International in the downstream oil business, particularly in the trading area. For the last 10 years or so he has been an independent consultant in these areas.

Owners claim that the cargo on board was, taken as a whole, off-specification for low sulphur VGO and of poor quality. Mr Allcard, having seen some further disclosure, formed views about this issue in his second supplementary report of 13 October 2010, itself prepared only shortly before the trial, which I admitted into evidence. I refused to allow in yet another report from Mr Allcard. Despite knowing of this ruling he appeared keen, nonetheless, to submit his additional views to the court (see transcript Day 5 at page 58). His conclusion was that the VGO discharged into the LBC tank in Houston at relatively high sulphur and carbon residue levels. The Port Allen VGO had relatively high density combined with high carbon residue, nitrogen and residue levels. This led Mr Allcard to the opinion that the inferior qualities of the VGO’s available at LBC and Port Allan were the primary factors affecting the price levels made on the eventual sales and accounted for the higher levels of discount SJB were obliged to accept for the Port Allen VGO. They also made it unlikely that Shell would have taken the cargo. He also pointed out that the cargo Shell later bought was for a delivery date that the vessel could not have met. However it seems that the date Shell was discussing with SJB was within range.

There was no opportunity in the time available for SJB to obtain detailed expert evidence on this quality point – Miss Jago disclaimed any expertise in this area. The amendment was permitted on the basis that if, by the end of the trial, SJB was still unable to deal with it then the amendment permitting it might be disallowed or some further hearing arranged.

As I see it, it is unnecessary to pursue the matter. It was Mr Vellenga’s intention to sell the cargo ex-ship and I accept his evidence, supported by the 6 June transcript which I mentioned earlier, that Houston was only a back-up. The cargo would have been blended on ship to optimise quality; that sold from shore tanks was not so blended. There is no suggestion that the product for the proposed sale to Shell was not to specification as one sees from an email of 2 August 2007. There is no evidence that the cargo unloaded at Houston was of poor quality and it was sold at market price. SJB accepts, and conceded in some US proceedings, that the quality of the Port Allen cargo was lower and that this would have been reflected in a price reduction of 50 cents per barrel although the actual reduction from market was even lower. Miss Jago points out that the cargo sold at Port Allen was sold at +3 and 3.25 when the market was closer to 6. SJB explained that it discounted the price to sell the material quickly because storage at Port Allen cost 2 dollars per barrel per month based on the capacity of the tank not the quantity of stored oil. So it made economic sense to sell at the lower price. I accept that.

In general I was more confident of the weight of the views of Ms Jago than those of Mr Allcard. Mr Allcard’s written report was impressively detailed. He was however very confident, perhaps too confident, of his expertise on a wide range of issues, particularly when it came to mitigation. He also seemed to identify with the cause of his client much more than Ms Jago and was the inspiration for Owners’ applications for amendments. His exposition of his understanding of the legal approach to matters such as mitigation, the prices to be taken when assessing damages and the effect of a falling market price on damages was well meant but not helpful.

The vessel arrived at Houston on 24 July and was inspected by Class and some conditions were removed and others imposed, the details not being material to the issues. Discharge orders were given on 27 July, barges were unavailable and about 200,000 barrels were placed in LBC shore tanks and the process completed on 3 August. On 6 August the vessel went to Port Allen where the remaining 95,000 barrels or so were discharged into tanks. The cargo was sold in a series of deals between 21 August and 7 September for a total of $1,185,460. I find nothing untoward about what happened after the arrival at Houston given the situation in which SJB found itself.

On 30 July Owners were informed “Regret to inform you that MT Rowan does not meet the requirement for charter by a Shell group company. Please see the below from Shell”. Attached to that message was an email from Shell’s inspection administration confirming that the vessel did not meet the requirements for a charter by a Shell group company, for carriage of a Shell cargo and for carrying out cargo operations at a terminal operated by a Shell group company. The message adds “This vessel must be re-inspected whilst carrying out a cargo discharge operation at a non-Shell terminal before we will consider assessing her suitability. Such re-inspection should not take place until at least six months from the date of this letter”. The subsequent steps taken by Mr Vellenga and SJB are not in dispute. Owners do however claim that he failed to mitigate damage in respect which I shall turn to shortly.

Owners broke the warranty that to the best of their knowledge and belief the vessel was approved by the specified companies and would remain so throughout the duration of the charterparty. It is, for the reasons I have given, inconceivable that if asked whether the approval letters still applied in the light of what had happened at Antwerp, the extent and implications of which were known to Owners, that any of the specified companies would have continued to regard the vessel as approved in the sense I have described SJB had done a deal with Shell subject to the question of the vessel or were on the brink of a contract. Shell had withdrawn because the comfort of the warranty had been lost by the events at Antwerp, or rather through their SIRE report which reflected these. The next question is what, if any, loss was caused as a result of the breach of the warranty that the vessel would remain approved by the specified companies throughout the charterparty?

Mr Raphael submits that there is no causation between any breach established and the loss claimed. There is no suggestion that SJB lost any sales to the majors named in the clause. Further there was no evidence that Shell, Conoco or any other buyer would have known about any reaction by the named majors, even if there had been one. Furthermore, the crack is a distraction since whatever its significance none of the majors, nor the potential purchasers, can have known about it at any relevant time. Mr Raphael suggests that it is facile to contend that the vessel would have been acceptable to the other majors if the five specified approvals had been maintained. As is clear from the text of the letters themselves there is no guarantee that even the named companies would approve a vessel later on, let alone other majors who were potential purchasers. The warranty relates to the approvals but not to the condition of the vessel.

As I see it the significance of the approvals was precisely what Mr Vellenga stated it to be. Once Shell and other potential purchasers were aware of the events at Antwerp the assurance provided by the letters was of no further value. In practice the approvals were not being maintained throughout the life of the charterparty. It does not follow that because the obligations of seaworthiness are less demanding than the approvals clause cannot have the effect for which SJB contends. Similarly the fact that the letters, although often called approval letters, do not guarantee that a vessel will be acceptable to the writers if a contract arises is beside the point; those collecting and those relying on the letters are well aware of their intrinsic limitations. I accept that the Vitol clause is a demanding one, but no more so than other clauses seen in the bundle. Further the charterparty was for a limited period of time and it seems that the rate paid was a high one. Moreover, some bargains are better than others. It is more likely than not that if the vessel had remained, as it was warranted to in an approved state, then SJB would have sold the cargo to Shell (STUSCO) or one of the other potential purchasers with whom Mr Vellenga dealt.

I turn next to assessment of the loss caused to SJB by what I have concluded is the breach of warranty by Owners during the charterparty. Before turning to matters of calculation I first deal with Owners’ claim that SJB has failed to mitigate its damage.

Owners have contended throughout that SJB failed to act reasonably to mitigate its loss. Initially Owners put SJB to proof of attempts to find an alternative purchaser and otherwise relied upon what they contended to be delays between the vessel arriving at Houston on 24 July and the orders to discharge at Houston and Port Allen on 27 July and on 6 August. Owners contend that SJB should have acted more quickly and discharged the cargo or part of it into shore tanks and barges immediately on the vessel’s arrival in Houston and also should have used lighters to transfer the cargo to another vessel. By a late amendment Owners added to their mitigation case with an allegation that SJB’s attempts to sell the cargo at sea were inadequate and that they made inadequate attempts to find alternative storage providers. Owners also argue that SJB came under a duty to hedge.

Owners’ case on mitigation, like its position on quality is, developed from views expressed by Mr Allcard. He says “I believe that (Mr Vellenga) did not act in a manner consistent with trying to mitigate the possible consequences of the inspections of the Rowan carried out by Class and Shell at Antwerp.” Mr Allcard suggests that SJB should have tried to sell the VGO on board the Rowan even before she arrived at Antwerp from Batumi or shortly after she left Antwerp. He also says that by 4 July Mr Vellenga knew of the potential difficulties and had the opportunity and the capability to hedge against a likely decline in the VGO premium. As soon as he became aware of the loss of the sale to Shell he should have hedged the premium especially in the knowledge that the US VGO market was softening. If Mr Vellenga had taken these reasonable steps he would have made a hedging profit of $3,665,950. Further, faced with difficulties in selling cargo ex-ship, SJB should also have sought to discharge cargo immediately upon the vessel’s arrival in the US Gulf. Insufficient efforts were made to locate additional capacity at LBC and the entire Rowan cargo could have been discharged into the LBC terminal without recourse to other capacity.

Miss Jago’s response was first to point out that hedging was an area of specialist expertise and to suggest that, if the point were to be developed, real experts in the field would be needed. However she pointed out that hedging would have had to have been indirect by use of what is known as the “crack spread”. The crack spread is an indirect hedge and does not always correlate with the price of VGO and did not do so during the period in question. The other point, made by SJB itself, is that it does not in principle hedge the crack spread. Traders are allowed to have small speculative positions but not more than that. In particular crack hedging for cargos is not allowed. There are complex commercial criteria involved in decisions as to whether to become involved or not in this category of hedging. Some companies see the available tools as speculation rather than a hedge. Miss Jago’s overall conclusion is that “due to poor correlation between the prices he uses over the periods in question the strategies outlined by Mr Allcard are speculative from a trader’s point of view and an inappropriate hedge”.

Mr Cogley contends that Mr Vellenga clearly did everything he could to try and sell the cargo that is what oil traders do. He points out, it seems to me correctly, that the claims made about the barges in Houston are speculative and Mr Vellenga’s evidence is that they tried to locate barges but could not do so. All the other steps towards the end of the voyage seem to me reasonable and not at all out of the way. The criticisms are all made with hindsight by those who were not directly involved with the issues. There is no sign that at the time these events were unfolding and SJB was complaining, that Owners felt that SJB was acting unreasonably in its approach to selling the cargo.

I see no reason why Mr Vellenga should have engaged in the process of hedging which was imprecise and in respect of which I prefer the cautious, detached, albeit possibly less expert, view of Ms Jago to the views expressed by Mr Allcard, who may be slightly better qualified in this area, but not sufficiently so for his confident views to be accepted. For sound reasons SJB severely limits the ability of traders to hedge. In the only part of his evidence where he became at all heated, Mr Vellenga graphically outlined the strenuous, if not desperate, efforts he had been making during the course of ruining a family holiday in the Channel Islands, to achieve a sale following the withdrawal of Shell. Of course those efforts have to be evaluated objectively but I consider that SJB acted reasonably and disagree with Mr Allcard that Mr Vellenga was ‘imprudent’.

The obligation to mitigate is not a heavy one. As I said at the trial it may well be that a lot of time and money would have been saved if Owners had adopted not the criterion for mitigation put forward by Mr Allcard but that set out by Lord Macmillan in Banco De Portugal-v-Waterlow [1932] AC 452 some 80 years ago:

“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in position of embarrassment, the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult position by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken”.

Subject to the matters with which I have already dealt calculation of the loss caused to SJB by what I find to be a breach of warranty should be relatively straight forward being the difference between what SJB would have received from Shell or another buyer and what the cargo actually realised. Owners claim that the +13 which SJB claims it would have obtained from STUSCO is too optimistic and that a better measure is the WTI +9 achieved on the sale from Valero to Shell (albeit that Mr Allcard says that the delivery window for that transaction would have been too early for SJB). Mr Raphael also contends that if the Shell price of +13 were taken the calculation should be reduced by some $197,000, taking account of market price movement and by a further $475,476 to take account of the poor quality of some of the VGO. He also says that if SJB had sold the cargo on an ex-tank or ex-barge basis on 12-13 July or earlier, they would have achieved WTI +11.30. He applies what he describes as “the correct legal basis for market valuation of oil cargoes.”

SJB puts its loss at $2,526,950, the difference between the price it says had been agreed with Shell at +13 and the actual proceeds of realisation. Ms Jago also puts forward various other suggested losses which are not pursued. Those sought in the Particulars of loss and damage are not seriously in dispute and the issue therefore is simply what the price should be taken to be for the sale that was not achieved. As I see it in all likelihood the STUSCO deal would have gone through but there is always some risk that there may have been some problem or attempted renegotiation or sale to another company on similar terms notwithstanding all the vessels approvals remaining in place. That needs to be recognised in assessing the damages.

I make no reduction for quality for the reasons I have given. Similarly I make no reduction for market price movement. Mr Allcard’s deduction for this is developed briefly by Mr Raphael by reference to cases such as Smith New Court-v-Scrimgeour Vickers [1997] AC 255 ,the features of which seem to me to be of no application to this case where SJB was locked into any market movement while trying to sell the cargo and The Achilleas [2009] 1, but in this case, the category of loss is entirely foreseeable and there is no question of responsibility for it not having been assumed. There is as I see it nothing in this point. This is a conventional assessment of damages in a well known market without special features.

Mr Cogley submits, by reference to Allied Maples Group-v- Simmons and Simmons 1995 1 WLR 1602, that even if the Court is not satisfied on balance that there would have been a sale to Shell it may conclude that there was a real or substantial chance of a sale. In this event the Court must award damages but discount these by an appropriate percentage. In the event however I am satisfied that there would have been a sale to Shell or to another buyer at the same time on much the same terms. I would have expected the price to be around the +13 mark. I have regard to the comparables and their limitations identified by the experts and to the OPIS prices for VGO at the relevant dates. There is however the risk that the price would have been lower or the terms different and I propose to recognise that as best I can by taking damages to be at a price of +11, being well below what seems to have been the market price for the day or days in question. In the period between 10 and 13 July the OPIS mean average was between 12.875 and 13.50. In the week of 16 July the mean was 12.00.

Damages will therefore be assessed on the basis set out at paragraph 44 of the re-amended defence and counterclaim but with an adjustment to reduce the $13 to $11 which will then, as I see it, reduce the $3,246,592 by $570,990 leaving $2,675,602.

I have followed the approach of the parties in the action in dealing first and primarily with the counterclaim and only then, and more briefly, with the claim itself which is for demurrage.

The conduct of this aspect to the claim has been messy. When action was brought in September 2008 Owners claimed demurrage at the charter rate of US 24,000 pdpr for 18 days 22hours 54 minutes amounting to $454,900.01. The claim was based on 12 hours 18 minutes at Batumi, one day and 26 minutes at the Turkish Straits, three days 2 hours and 9 minutes at Antwerp, 13 days 12 hours and 12 minutes at Houston and 19 hours and 49 minutes at Port Allen. Earlier SJB had in effect admitted $ 453.033.33. Before trial SJB sought to withdraw the admissions made and, as part of the quid pro quo by which I allowed both sides to try and improve their cases at this late point, I permitted this in part and subject to conditions. A change to Turkish Straits was refused, Batumi, Antwerp and Port Allen were permitted and Houston only on the basis that I would withdraw permission at trial if, once I had the relevant material, I considered that it was not fair to expect Owners to deal with it in the short period they had to prepare. I also reserved the right to withdraw permission for all the late amendments on both sides if, once I had been informed by the trial, I considered in hindsight that it would be right to do so.

Batumi is now conceded at 14 hours 3 minutes, which with Turkish Straits, makes 38 hours 29 minutes. Antwerp is also conceded as to 90 hours 52 minutes but challenged as to 8 hours 18 minutes when the vessel was bunkering and 8 hours 15 minutes for delivery of documents. Port Allen is conceded at 18 hours 36 minutes but there is a dispute at Houston where SJB accepts only 5 days and 10 hours 33 minutes of a claim for 12 days 23 hours 51 minutes. SJB thus accepts 261 hours 47 minutes and US$261,470. This leaves a minor issue at Antwerp and a major one at Houston.

Antwerp. I take Owners to concede 8 hours 18 minutes from ‘hoses off’ to ‘documents on board’ (see closing submissions- 19 October page 106) unsurprisingly as it has been freshly introduced into the case. But Mr Raphael challenges the 8 hours 28 minutes which Mr Cogley says in his written closing submission is due to work being done at a lay-berth thus it was not a customary berth at which documents would otherwise have been delivered and the vessel was not at the charterer’s disposal during these periods. Mr Raphael contends that the period in question relates to work which amounts to no breach of obligation by Owners. There was no obligation to wait at the customary berth until documents are delivered. Mr Cogley did not respond to that in closing submissions. There seems to be some tacit acceptance that the first item does not count but that the second item does.

Houston. It is common ground that the first notice of readiness was invalid but SJB disputes the second notice also and contends that time should not start to run until the vessel tied up at a customary anchorage or equivalent. This point was not pleaded but simply put in cross examination. SJB also claims that the vessel was not at the charterer’s disposal because when instructions to discharge were given the master did not follow them. Mr Raphael answers these points but objects to them having been brought in at all. He points out that although the withdrawal of admissions was permitted, subject to conditions, his right to plead that SJB is estopped from resiling from its previous position or has waived its rights remains. It is not suggested that there was any contractual acceptance of the previous position and Mr Raphael’s estoppel claim has not been developed. But I have sympathy with his claim that it is unfair for the Houston issue, to which a new aspect was brought in very late, to be determined in the short time span available for preparation before the trial and then briefly at the hearing itself. He points out that Mr Bjorkelund was his only available witness and as someone very senior in Norway, could not deal with matters as the Master or others on the spot could have done. Mr Cogley claims that this is a smokescreen but I disagree. The issue appears to involve more than US $180,000 and having chosen to go into detail about such matters as where the customary anchorage is SJB has opened up matters which Owners cannot have had a proper chance to deal with. In my view the right way to deal with Houston is for me to refer this aspect for determination by the Admiralty Registrar (perhaps in his capacity as master) but on costs terms that ensure that Owners are protected, whatever the outcome, from the wasted expense of the matter going off unnecessarily to a separate hearing.

I have dealt with those issues which seem to have been live at the trial but, in the interests of brevity, not addressed some points that were pleaded but not much pressed. One example is title to sue. Another example is SJB’s misrepresentation claim which, as I see it, falls away. I will if required deal at the next hearing with this and any other matters which I have overlooked.

This paragraph briefly summarises the outcome to assist the parties and is not part of the reasoning of this judgment. I prefer SJB’s arguments about the terms and construction of the charterparty. The letters at issue in this case did amount to approvals as required by the warranty at issue. Following events at Antwerp the vessel ceased to remain approved and there was a breach of warranty. That breach of warranty prevented SJB from selling the cargo to Shell or possibly another buyer probably but not necessarily at a price around WTI+$13. SJB suffered loss and did not fail to mitigate its damage. Aspects of Owners’ demurrage claims remain unresolved and, in the absence of agreement, will be tried by the Admiralty Marshal.

I shall be grateful if, not less than 48 hours before hand down of this judgment, Counsel will let me have a draft Order, agreed if possible, and a note dealing with all matters which they seek to raise at the hearing.

I have pointed out the highly unsatisfactory circumstances in which this case came to trial. I am however most grateful to Counsel and solicitors for their most able, courteous and constructive assistance once we finally got going.