Yilport Konteyner Terminali Ve Liman Isletmeleri AS v Buxcliff KG & Ors

This is an action by the Claimant, the operators of the port of Yilport in Turkey, for the recovery of sums said to be due as a result of the discharge of containers from the First Defendant’s containership CMA CGM VERLAINE (“the Vessel”) between 8th and 13th April 2010. By the end of the trial, the sum claimed was US$1,380,977, representing a total charge of US$3,380,977 less US$2,000,000 paid on account. The Defendants deny liability for the sum claimed and seek repayment of any sum due in the event that the payment on account made to the Claimant was an overpayment.

The Vessel was at the time on charter from the First Defendant to CMA CGM S.A. (“CMA CGM”) and was being used by CMA CGM for their liner service between Asia and the Black Sea. The Vessel was managed by the Second Defendant and was entered for hull and machinery, loss of hire, and protection and indemnity cover with the Third Defendant.

The dispute between the parties encompasses contractual and quantification issues. Factual Background

The matters set out in this part of the Judgment appear from the documents, witness statements and experts’ reports and did not appear to be contentious.

The Vessel is an 8 hold container vessel capable of carrying up to 6,456 TEUs (“TEU” means 20 foot equivalent unit and represents a standard 20 foot container).

On 4th April 2010, the Vessel was in a collision with the vessel “ODESSA STAR” at Izmit Bay, Turkey whilst en route to Evyap Port, Turkey.

During the collision, the bow of ODESSA STAR penetrated the port side of the Vessel in way of holds 4 and 5. The Vessel’s side shell was breached over an area of approximately 10m x 14m both above and below the water line.

At the time of the collision, the Vessel was laden with 3,431 containers totalling 5,057 TEUs. Containers were stowed up to seven tiers high on deck and in 16 rows across the width of the Vessel. The effect of the collision was that:

The Vessel had been scheduled to discharge 699 containers at Evyap and thereafter to proceed to Ambarli, Turkey to discharge 570 containers, Constanza, Romania to discharge 677 containers, Illyachevsk, Ukraine to discharge 657 containers, Odessa, Ukraine to discharge 829 containers, and then Yangshan, China to discharge 1 container. Immediately after the collision, the Vessel continued on its way to Evyap.

Due to the damaged condition of the Vessel and a number of its containers, Evyap was only willing to accept the Vessel for any discharge of containers subject to terms as to the handling of any dangerous cargo and as to the period of berthing which the Defendants were not prepared to accept. These terms included a requirement of a penalty payment of US$1,000,000 per day and pro rata if the Vessel did not leave her berth at the stipulated time – 16.00 hours on 8th April. Therefore, as a result of the collision, the scheduled partial discharge at Evyap did not proceed.

On 7th April 2010 there was a meeting attended by representatives of the Claimant, representatives on behalf of all the Defendants, and representatives of CMA CGM for the purposes of discussing the discharge of the Vessel at Yilport. An agreement in principle was reached during the meeting that the Vessel would proceed to Yilport the following day, 8th April, and would there discharge all the Turkish containers (about 1300 containers) and any damaged deck cargo. There was no discussion as to the charges or costs to be imposed by the Claimant for the discharging of the Vessel. It was however agreed that the First and Second Defendants would provide a Letter of Undertaking (“LOU”) and that the Third Defendant would provide a Letter of Indemnity (“LOI”). Mr Coskunsu, a Turkish lawyer appointed by the Defendants after the collision, drew up some minutes of the meeting.

On 8th April, the LOI was provided by the Third Defendant in the following terms:

“In consideration of your allowing the “CMA CGM VERLAINE” to enter Yilport, berth and discharge her cargo including damaged and flooded containers, we hereby agree to indemnify you upon your written demand of a properly proven claim, in respect of any and all consequences, liability, loss or damage that you may incur and which may arise, including but not limited to, damage to the port or its personnel and facilities, oil pollution, wreck removal and loss and damage to any cargo, its containers and from handling the damaged cargo and its containers including any delays, penalties or fines caused by or raised by the customs authorities and all reasonably and properly incurred legal costs and expenses.

This indemnity will take effect from the moment the vessel is in the vicinity of the approaches to Yilport, continues whilst the vessel remains in Yilport and exits Yilport and its approaches.”

On 9th April, the LOU was provided by the First and Second Defendants in the following terms:

“In consideration of your agreement to grant us permission to berth our vessel, “CMA CGM VERLAINE” (“the Vessel”) at Yilport for the purpose of discharging some or all of the containers (“cargo operations”) presently onboard our vessel, we hereby agree and undertake to yourselves the following terms and conditions:

It is common ground between the parties that the LOI and LOU contain the parties’ agreement(s) to allow the Vessel to discharge at Yilport and for the Claimant to provide various services to the Vessel.

The Vessel berthed at Yilport on 8th April and discharging operations commenced at approximately 17.15 hours that day. By 09.45 hours on 9th April, 1000 containers had been discharged. On the 9th, part of the way through these operations, Yilport was asked and agreed to discharge all the Vessel’s containers at Yilport.

The following day, 14th April, the Claimant presented to the Defendants their bill for the work that had been performed in discharging the Vessel. It amounted to US$3,825,464. The Defendants were not prepared to pay the bill but on 20th April made a payment on account to the Claimant in the sum of US$2,000,000.

No further payment was made and proceedings were commenced by the Claimant on 5th August 2010. By this time, the Claimant’s claim had increased to US$2,029,874.17 (US$4,029,874.17 less the US$2,000,000 paid on account). Since then the amount claimed by the Claimant has progressively reduced such that the claim is now for US$1,380,977, representing a total charge of US$3,380,977 less the US$2,000,000 paid on account. The Claim & The Issues

The Claimant has issued 8 invoices as representing their total claim:

Prior to the commencement of the trial, the Claimant withdrew its claim in respect of invoice 285345, save for the US$15,000 legal fees which the Claimant now seeks to recover as costs.

In summary, the Defendants’ position in relation to the outstanding invoices was as follows:

Accordingly, it is necessary for me to decide the construction issues that have arisen in relation to the LOI and the LOU and thereafter to decide in respect of each of the sums claimed whether it is recoverable under the LOI or LOU (to the extent that is disputed) and what, if anything, should be allowed in respect of the sums claimed.

Factual Evidence:

Yilport adduced evidence from two witnesses of fact:

The Defendants have sought to rely on evidence from six witnesses:

The Claimant appointed Mr John Pugh as its expert and the Defendants appointed Mr Neil Gardiner as their expert.

There were issues as to the admissibility of certain of the passages in witness statements served by the Defendants over and above those which had already been redacted but none of the disputed passages has proved to be relevant or material to the decisions that I have had to make and so it is unnecessary for me to express any view as to the admissibility of those passages. I would only say that even if the passages had been potentially material to what I had to decide, I would not have ascribed much weight to the relevant passages in any event.

Insofar as it may be necessary for me to do so, I will address the particular aspects of any relevant witness’s evidence when I deal with the issues to which that aspect of the evidence relates. However, it is appropriate that I should record, at this stage of the Judgment, my general observation in relation to the evidence that has been adduced before me.

As a final general comment on the factual evidence adduced by the Defendants, it is quite remarkable that there was not one witness called by the Defendants to give evidence about the discharge of the Vessel. I was left with the distinct impression that the approach that the Defendants had taken was to seek to pick holes in the Claimant’s case rather than making any positive factual case of their own as to the nature and extent of the task confronting the Claimant in discharging their containers from the Vessel and in having to find somewhere to store them all. While this does not mean that my scrutiny of the Claimant’s claim should be any less robust, it does mean that there really is no evidence to gainsay what Mr Erkanat has said about the difficulties and dangers confronting Yilport in discharging this Vessel and as to the additional resources and expenditure that the Claimant incurred. It also causes me to have a degree of scepticism about the Defendants’ objection to the general level of the Claimant’s total charge.

Expert Evidence:

By an Order for Directions dated 21 October 2011, it was ordered that each party should be entitled to call one expert in the field of port services. The expert called by the Claimant, Mr Pugh, clearly had such expertise in generous measure. After spending the first eleven years of his career, from 1975 until 1986, as a Chief Officer on ships, he then spent seven years as an operations manager with shipping companies, which included container shipping, before moving into senior management at container terminals between 1993 and 2009. His work has been based in Dubai. By contrast, the Defendants’ expert, Mr Gardiner, had no meaningful expertise whatsoever. He described himself as a “general marine consultant”. His sole experience of the operation of a terminal from the perspective of a terminal operator was that he spent two weeks in the mid-1980s in the planning department at the Tilbury Port, having been sent there for training by his then employers, P&O. Otherwise, his only experience of port services has been as a user of the services as a Master of a ship, of which his own recent experience was between 2009 and 2011 as the Master on Ice-Classed container vessels primarily trading between North Europe and Montreal, Canada. Prior to that, his only experience on container vessels appears to have been as a more junior officer up to 1992. He admitted that his only relevant expertise was as to what happened between the ship and quay. In fairness to him, he did not claim to be an expert in port services but ascribed his role to be giving a technical opinion on the reasonableness of the Claimant’s charges. He quite properly disclaimed any ability to comment on any commercial considerations relating to the operation of a container port and I do not consider that he had the relevant expertise to comment on any practical considerations either. That perhaps explains why he did not even visit Yilport for the purposes of the preparation of his report.

The result was that the only assistance that I gleaned from Mr Gardiner’s report was in highlighting potential discrepancies in the Claimant’s charges, such as possible instances of double-charging, lack of documentary proof and inconsistencies with underlying documentation. The value of his report was that at least the Claimant had some forewarning of the specific points that might be taken by the Defendants on their invoices, in circumstances where the Defendants had not otherwise condescended to any detail in their challenge to the Claimant’s invoices, whether in their pleadings, the Scott Schedule or their witness statements. The absence of a genuine port services expert on the Defendants’ side meant that there was no expert evidence to gainsay that of Mr Pugh although in any event I found him to be a knowledgeable and reliable witness whose evidence I unhesitatingly accept. I am reinforced in my acceptance of his evidence by the fact that the Defendants have not been able to adduce any evidence from a port services expert to support their defence of the Claimant’s claim. The fact that there is no such expert evidence on the Defendants’ side again causes me to have a degree of scepticism as to the validity of the Defendants’ objection to the general level of the Claimant’s total charge.

The Claimant’s case is that the LOI operates, in effect, as a guarantee by the Third Defendant of the First and Second Defendants’ payment of the Claimant’s charges. The Third Defendant’s case is that the LOI merely operates, in effect, as an insurance against fortuitous loss or liability that the Claimant might suffer as a result of the discharge and does not extend to the cost of the discharge itself.

The Claimant relies on the fact that the LOI is in very broad terms, extending to “any and all consequences, liability, loss or damage that you may incur and which may arise”. It was submitted by Mr Lewis that the word “loss” was wide enough to cover loss due to either the insolvency of the First and Second Defendants or the First and Second Defendants not paying what was due to the Claimant. He relied on the fact that although those general words were followed by specific examples which did not fit in with coverage for the Claimant’s bill for the discharge, those examples were prefaced by the words “including but not limited to” which demonstrated that this was not intended to be an exhaustive definition. Mr Lewis also pointed out that the examples were not limited to physical damage but extended to include “delays, penalties or fines” and “legal costs and expenses” (although the words “delays, penalties or fees” are limited by having to be “caused by or raised by the customs authorities”). Mr Lewis submitted that to construe the LOI as not covering the Claimant’s bill would be uncommercial because that would not reflect the identity of interest of the parties involved on the Defendants’ side. In particular, if there was an arrest or threat of arrest of a Vessel in the event that a port’s bill was not paid, a P&I Club would put up security for the Insured’s obligations so that the Vessel could sail and trade.

On behalf of the Third Defendant, Mr Smith submitted that if the LOI had been intended to be a guarantee of payment of the Claimant’s charges by the First and Second Defendants it would have said so explicitly, particularly as it was drafted by English lawyers. Furthermore, if it had been intended that the Third Defendant should bear responsibility for the Claimant’s charges, the Third Defendant could have been made a party to the LOU or there could have been some cross-reference in the LOI to the LOU or the LOI could have used the language of the LOU, in particular the phrase “all charges, dues and expenses” which appears in the penultimate paragraph of the LOU. Mr Smith further submitted that although the examples given were not exhaustive, they are not irrelevant because they give an indication of the type of things to be covered by the LOI and the Claimant’s charges are not colourably similar to those examples. It would be odd, he said, if the LOI was intended to give extremely wide cover extending to the Claimant’s charges in circumstances where it only gave narrow examples of the type of consequences, loss and liability that were included within the indemnity. Finally, he relied on the temporal provision in the second paragraph of the LOI which, he submitted, was not consistent with some form of liability as guarantor for the subsequent default of the First and Second Defendants.

I do not consider that the language of the LOI is capable of imposing on the Third Defendant either a direct liability for the Claimant’s charges or a liability as guarantor of the First and Second Defendants’ liability to pay those charges. Whilst I recognise and accept that in the circumstances the Claimant might have had the commercial option to require the Third Defendant also to accept responsibility for the Claimant’s charges and that there might have been some commercial incentive for the Third Defendant to do so, it is not open to me to re-write the parties’ bargain in order to make it fit in with what might have been a commercially sensible or realistic arrangement. The fact that the Third Defendant did not accept responsibility for the Claimant’s charges is not commercially unrealistic or nonsensical and there is therefore no cause for me to conclude that the language of the LOI should not be given the meaning that its words appear to bear and I accept Mr Smith’s submissions as to the effect of the words used when read in the context of the LOI as a whole. The indemnity given by the LOI is in respect of fortuitous consequences, liability, loss or damage that the Claimant might incur or which might arise as a result of the discharge. The fact that the discharge would involve the Claimant carrying out work for which it would charge was not a fortuity but was the one thing that all the parties knew would be involved in the discharge. The most powerful point in support of the construction for which the Third Defendant contends is that in circumstances where the parties well knew that there would have to be a charge for what the Claimant was doing, the silence of the LOI on that aspect is a deafening one.

On that basis, the LOI can only apply to the Claimant’s charges in respect of damage to its equipment and installations. I accept Mr Smith’s submission that it cannot extend to mere maintenance or wear and tear. There would have to be some fortuitous damage caused during the discharge in order for the LOI to apply. I will identify in the course of this Judgment those items to which I have concluded that the LOI does apply. The LOU

The issue between the parties is as to the terms governing the Claimant’s charges. As I have indicated, it is common ground that there was no specific discussion or agreement as to the level of charges that the Claimant could make for the discharge, which means that there was no explicit agreement that the Claimant could charge any uplift on its standard tariffs or any costs or expenses in addition to those tariffs. Equally, there was no specific discussion or agreement which would prevent the Claimant from seeking to recover such an uplift or such additional costs and expenses. The Defendants, however, submit that on its true construction the LOU does preclude the charging of any uplift or any additional costs and expenses or alternatively any costs and expenses of more than the most limited ambit relating specifically to damaged containers or damage to the Vessel.

The first way in which the Defendants put their case was that CMA CGM had in place a special reduced rate with the Claimant for their regular discharges and that the words in the LOU “all inward and outward charges … and all other charges levied in accordance with the terms and conditions of Yilport” are referring to the CMA CGM terms. This case was based on the role that CMA CGM had in making the arrangements for the discharge of the Vessel at Yilport and on what Mr Coskunsu said in paragraph 14 of his witness statement about a reference to the CMA CGM special reduced rate at the meeting of 7 April. However, in light of Mr Coskunsu’s acceptance in oral evidence that he only heard reference to that in discussion between members of the CMA CGM team, Mr Smith accepted in his Closing Submissions that a case on the application of the CMA CGM special reduced rate would be difficult to maintain. In my judgement, it is a non-starter. Firstly, the application of such a special reduced rate would be so surprising in the context of the proposed discharge of a damaged vessel with damaged containers that I would have expected there to be evidence of a clear and explicit agreement if the Claimant was to make the significant commercial concession of agreeing to the application of such a rate. Secondly, there is no evidence that the rate was even mentioned to the Claimant at the 7 April meeting, let alone raised with them as a basis for charging. Thirdly, if it had been intended that this special reduced rate should be applicable, I would have expected it to be specifically referred to in the LOU but it is not.

The Defendants’ alternative submission was that if the reference to “Yilport’s terms and conditions” was not a reference to the CMA CGM special reduced rate, then it was a reference to the Claimant’s standard tariff. In particular, the Defendants relied on the use of the word “levied” and what was asserted to be the commercial commonsense of having a pre-determined rate for the job rather than allowing the contractual price to be determined entirely at the discretion of one of the parties. Whilst it is right that the Claimant did have a basic tariff of charges, the “Walk-in Tariff”, the Claimant submitted that this merely reflected the minimum rates that the Claimant would expect to charge a one-off customer with an undamaged vessel and undamaged containers. Furthermore, the Claimant submitted that the reference to “terms and conditions” was not apposite language for the parties to have used if the intention had been simply to refer to a price list or tariff.

This issue arises because the Claimant seeks to justify its uplift and additional charges by reference to its General Terms and Conditions in force at the time and which, according to Mr Erkanat’s evidence, which I accept, were published in Turkish on the Claimant’s website. Those terms and conditions provided, insofar as material, as follows:

“2 CONTAINER TERMINAL SERVICES

2.1

General Terms and Applications

...

Unless otherwise noted fees for services rendered are standard for Main Container Terminal, Land Container Terminal and Empty Container stocking areas.

All the service rates for non-standard (OOG) containers will be .…% more than the standard rates.

All the service rates for containers with Dangerous Goods (IMO) content will be ….% more than the standard rates.

Based on transport amount, cargo weight, equipment requirements and volumetric characteristics YILPORT will differentiate between OOG container and project load status then determine the rates.

Similar to project cargo, tariff for damaged containers and/or vessels handling from the vessel will be determined by YILPORT depending on the type of operations. …

2.4.4

Other Storage Services

•

Pricing for the storage of damaged containers or containers with a leak will be determined case by case basis depending on the severity of the problem. …”

The reference to “project cargo” is a reference to specialist heavy cargo. The Claimant in particular relies on the provisions relating to damaged containers and damaged vessels.

The terms and conditions also address what is encompassed within vessel charges, charges for the loading/discharging/restoring/shifting of containers, charges for container storage services and charges for terminal handling charges.

In circumstances where the Claimant’s terms and conditions address the approach to be adopted by the Claimant in relation to charging for its services, there is no misuse of language in the LOU having been intended to refer to the General Terms and Conditions when it refers to “charges levied” in accordance with Yilport’s terms and conditions. The reference in the LOU to “the terms and conditions of Yilport” is also more appropriately a reference to a set of terms and conditions than to a rate. Furthermore, contrary to Mr Smith’s submission, I consider that it would be wholly commercially unrealistic for the parties to have contemplated that a standard basic tariff applicable to undamaged vessels and containers would be applicable to this discharge and, as with the CMA CGM rate, if it had been agreed that such a tariff should apply I would have expected the parties to have specified that tariff explicitly. Nor do I consider it to be at all commercially surprising or unrealistic that the parties should adopt a “wait and see” approach to charging for the job in circumstances where the situation, as I find it to be on the evidence before me, was that none of the individuals at the meeting on 7 April had a clear idea as to the severity of the damage to the Vessel or its containers or what difficulties such damage might pose to the process of discharging the Vessel.

I am reinforced in my conclusion by the evidence given by Mr Pugh that the charges for the discharge of damaged containers and/or from damaged vessels are usually negotiated after the event, in particular when the port and/or the vessel owners/charterers do not know the details of the extent of the damage. His evidence was that if there was an attempt to negotiate prices in advance in such circumstances, the port would often stipulate a very high uplift as a safeguard, knowing that it would not be accepted so as to enable the port to negotiate their charge with the benefit of knowing what the discharge actually involved.

Accordingly, I reject the submission that the reference to “charges levied in accordance with the terms and conditions of Yilport” was a reference to the Claimant’s standard tariff. I conclude that both linguistically and in its context, it was a reference to the Claimant’s General Terms and Conditions.

On the basis of that conclusion, the next issue is as to the effect of the relevant provisions of the General Terms and Conditions that entitle Yilport to determine rates or tariff or pricing. The Claimant submits that this means that the Claimant’s determination of its charges can only be challenged on the grounds of Wednesbury unreasonableness whereas the Defendants submit that reasonableness rather than Wednesbury unreasonableness is the relevant test. This is also relevant to the Defendants’ submission that a term which confers on a party a discretion to fix the price for a service of the nature contended for by the Claimant would be onerous and unusual and that on those grounds such provisions ought not to be incorporated by reference.

In support of the submission that the Claimant’s discretion to fix the applicable charges under the relevant provisions of the General Terms and Conditions was only subject to an implied obligation not to act unreasonably in determining the appropriate charge in a Wednesbury sense, Mr Lewis relied on the review and analysis of the relevant authorities by Rix LJ in Socimer International Bank Limited v. Standard Bank London Limited [2008] 1 Lloyd’s Rep 558. In reliance on what was said by Rix LJ in that case at paragraphs 60-66, he submitted that:

Mr Smith submitted that the Socimer case and the cases cited by Rix LJ were not binding for the purposes of this case in that each case turned on the construction of the particular contract before the Court. In any event, he submitted, those cases were all distinguishable in that none related to the primary obligation of payment of the price for services rendered. He submitted that a construction of the provisions which entitled the Claimant to set the amount that it was to be paid at its discretion subject only to the narrow Wednesbury standard of reasonableness could not be justified.

There is force in Mr Smith’s analysis of the authorities. The Socimer case concerned the right of a party to determine the value of assets where the contract with the other party was terminated as a result of that other party entering into liquidation. The Product Star concerned a discretion as to the loading or discharging of cargo. LudgateInsurance Co Limited v. Citibank NA [1998] Lloyd’s Rep IR 221 concerned a bank’s rights to retain additional margins in an account and allocate drawings. Gan Insurance Co Limited v. Tai Ping Insurance Co Limited (No 3) [2002] Lloyd’s Rep IR 612, cited at paragraph 63 in Socimer, concerned the withholding of approval of a settlement by reinsurers. The Paragon Finance case concerned the entitlement of a mortgagee to vary the interest rate. Cantor Fitzgerald International v. Horkulak [2004] EWCA Civ 1287, cited at paragraph 65 in Socimer, concerned the payment of a discretionary bonus. Mr Lewis was not able to meet the challenge made by Mr Smith to cite a case in which the Court had been prepared to hold that the effect of a contract was to confer on a party such a wide discretion to set the price that it was paid for services rendered.

The passage from the Judgment of Dyson LJ in The Product Star cited by Rix LJ at paragraph 64 in Socimer included the following passage:

“I entirely accept that the scope of an implied term will depend on the circumstances of the particular contract.”

The reference to “the circumstances of the particular contract” must include all of the relevant circumstances, including the subject-matter of the decision, the language used in the contract and what explanation there might be for the language used in the contract other than conferring on a party such a wide discretion.

Construing the relevant provisions of the Claimant’s terms and conditions in their context, the intention would seem to me to have been to make it clear to users of the Claimant’s services that in the particular circumstances identified, such as damaged vessels and damaged containers, any standard rate for work done would be inapplicable and the Claimant would work out how much to charge by reference to what the task actually involved. There is, therefore, a perfectly sensible and logical explanation for the references to the Claimant determining rates, tariffs or prices other than for the purpose of conferring some general discretion on the Claimant challengeable only on Wednesbury grounds, namely that the Claimant was reserving the right to charge additional sums in the specified circumstances. When one adds into the equation that this right is in relation to the primary obligation to pay the price for the services rendered, I do not consider that the circumstances of this particular contract justify the limited restraint on the Claimant’s right to set its charges for which Mr Lewis contended. I do not consider that a reasonable user of the Claimant’s services upon reading these terms and conditions would understand them to be conferring such a broad discretion on the Claimant but rather would understand these provisions as simply recording the Claimant’s right to charge a higher price for its work than would arise under its standard rates in the given circumstances.

That means that I must accept Mr Smith’s submission that the charges made by the Claimant pursuant to these provisions must satisfy an implied term that they should be reasonable. However, Mr Smith sought to treat this implied term as imposing a requirement that each item of extra work for which the Claimant sought to make a charge had to be proved and vouched in detail. It was almost as if he was treating the effect of the implied term as being to impose on the Claimant a standard for evidential proof of its claim equivalent to that which might be imposed on a building contractor seeking to recover the cost of additional work carried out on the instruction of the employer or the employer’s architect. However, the fact that the Claimant is only entitled to recover its additional charges insofar as they are reasonable says nothing about how that test of reasonableness should be satisfied. That will always depend on the facts and circumstances of each particular case. In the context of a building contract where a contractor would be expected to keep detailed records of the usage of labour and materials, proof of the reasonableness of the costs claimed might well require detailed vouching of each item of cost and expense. In a case such as this, which was dealt with on very short notice as an emergency situation, was certainly as far as the Claimant was concerned an exceptional situation (hence Mr Erkanat’s shock at seeing a ship in such a damaged condition), where the task confronting the Claimant could not properly be assessed until after the ship arrived, where knowledge of the scope of the task continued to evolve as the condition of the damaged holds and the damaged containers therein became more apparent, and where the nature of the task that the Claimant was being asked to undertake changed fundamentally during the course of the operation, the expectations as to the standard of the evidence that the Claimant might reasonably be expected to be in a position to produce must be adjusted. A reasonable user of the Claimant’s facilities in such a situation would not reasonably expect or be entitled to expect the Claimant to be in a position to provide a detailed vouching of its expenditure and I reject the attempt made by the Defendants to rely on the Claimant’s obligation to prove the reasonableness of its charges to justify what can only be described as a nit-picking approach to the analysis of the Claimant’s claim.

On the basis of the effect that I have given to the relevant provisions in the Claimant’s General Terms and Conditions, there can be no reasonable basis for suggesting that such terms are so onerous as to prevent their incorporation by reference. It is therefore unnecessary for me to decide whether such an argument would in any event have been prevented by the fact that the Defendants signed the LOU.

Mr Smith further sought to preclude the Claimant’s right to rely on its General Terms and Conditions in order to impose uplifted rates and additional charges by contending that the right to make an additional charge for damaged containers or vessels was precluded by clause 4 of the LOU. He contended that the effect of clause 4 of the LOU was to address precisely what additional charges the Claimant was entitled to impose on the Defendants as a result of the risks and dangers arising out of the Vessel’s damaged condition. He went so far as to contend that there was repugnancy or inconsistency between the relevant provision in the terms and conditions and clause 4 and that clause 4 would be rendered entirely redundant if the Claimant was entitled to raise extra charges under its terms and conditions.

I do not accept these submissions. As I have held, clause 3 of the LOU entitled the Claimant to charge the Defendants in accordance with its terms and conditions. Clause 4 of the LOU cannot be read as having been intended to restrict the Claimant’s rights to impose charges in accordance with those terms and conditions. Rather, it is there to protect the Claimant’s rights by making it clear that it will be indemnified for any additional precautions and safety measures that the damaged condition of the vessel required the Claimant to take. If clause 4 had been intended to cut down the rights conferred by clause 3, it would have said so. There is no inconsistency, repugnancy or redundancy to be found in the fact that clause 4, in addition to whatever rights the Claimant might have to raise extra charges under its terms and conditions, confers on the Claimant a right to be indemnified in respect of certain types of additional cost. I therefore reject the submission that clause 4 in any way “trumps” any of the provisions in the Claimant’s General Terms and Conditions or in any way restricts the Claimant’s rights under those Terms and Conditions.

On the basis that I was to find that the Claimant’s General Terms and Conditions were applicable to the contract, Mr Smith made further submissions as to the effect of the entitlement to make an additional charge in respect of damaged vessels and/or containers. Firstly, he submitted that the use of the word “tariff” meant that the Claimant could only charge an enhanced rate and could not make a charge for additional costs. He accepted that this argument would not have been available to him if, instead of a 70% uplift on its rates, the Claimant had worked out a higher uplift which covered all of the additional expenditure for which it wished to charge but he contended that the Claimant is stuck with the way in which it had presented its claim and insofar as the claim was not presented on a unit price basis, it was outside the scope of the provision. He submitted that it would be an extremely wide clause if the Claimant could decide on its own heads of claim.

I have to bear in mind that I am reading the General Terms and Conditions in a translation from their Turkish original. There are references to “tariff” in clause 1.1 which make it appear as though the application of tariff rates is being contemplated. However, under clause 2.1 there are references to “fees for services”, “service rates” and “rates” and in clause 2.4.4 there is reference to “pricing”. Read in its context, I do not consider that a reasonable user of the Claimant’s services would read and understand the reference to a “tariff” for damaged containers and/or vessels to be confining the Claimant’s entitlement to a charge based on an uplifted rate but would read the word “tariff” as being equivalent to the word “price”. In circumstances where the price charged would be subject, as I have held, to a requirement of reasonableness, a reasonable user reading these provisions would not read the word “tariff” in the pedantic and formulistic way that Mr Smith suggests it ought to be read but would read it in the more general and commercially sensible way in which I have held that it ought to be read. Indeed, a reasonable user of the Claimant’s facilities would be bound to prefer the greater transparency in the calculation of the Claimant’s charges that would be involved in specifying particular significant additional charges separately from the outset rather than reflecting those charges in some overall rate.

The other way in which Mr Smith sought to cut down the scope of the Claimant’s entitlement to raise additional charges was by submitting that the entitlement to raise an additional charge in respect of “damaged containers” did not entitle the Claimant to impose a mark-up in relation to the discharge of sound containers. He submitted that sound containers are by definition not “damaged containers” and that the reference to “damaged vessels” does not entitle the Claimant to apply a mark-up of its own choosing to its normal tariff on any occasion that cargo is discharged from a damaged vessel; extra costs sought to be recovered through the mark-up must have been incurred as a result of the damage to the Vessel. That is again a commercially unrealistic construction of the clause. If damage to a vessel and/or damage to containers increases the time, effort and expense involved in discharging and handling the sound containers on the Vessel, a reasonable user could not possibly have expected not to be charged an additional sum for that and would be bound to have read and understood the relevant provision in the Claimant’s terms and conditions as entitling the Claimant to make such extra charges as were appropriate and reasonable to cover the extra time, effort and expense in discharging the cargo from the ship in circumstances where there was damage to containers and/or damage to the Vessel. Of course, if only a handful of containers situated on the deck of a ship were damaged, a reasonable and appropriate charge would be likely to be confined to the additional time, work and expense involved in discharging those particular containers. What would be reasonable and appropriate would depend on the circumstances of each case but I do not consider that the General Terms and Conditions on a commercially sensible construction operate or could reasonably have been understood to operate in the confined way contended for by Mr Smith.

Having reached the above conclusions as to the meaning and effect of the relevant provisions of the LOU and the Claimant’s General Terms and Conditions, it is now necessary for me to consider the specific issues that arise under the invoices issued by the Claimant.

Invoice 284674:

Discharging of the Containers

The sum claimed of US$910,260 is subject to challenge on the grounds that it includes a 70% mark-up which is said to be impermissible under the terms of the LOU and in any event is said to be unreasonable. For the reasons I have already given, there is nothing in principle to prevent the Claimant from applying a 70% mark-up to the discharge of containers. The primary submission made by the Defendants was that only 573 containers were damaged and therefore 83% of the containers that were discharged were in a sound condition and required no services above and beyond those which would be provided in a normal discharging scenario. Criticism was also made of the grounds on which the Claimant sought to justify the uplift at the time but on the basis of the implied term which I have concluded applies, the question for me is whether I consider that the Claimant has discharged the burden of proving the reasonableness of this uplift on the evidence before me. The fact that some of the explanations for the uplift that were given at the time or relied upon at trial may prove to be ill-founded (for example, to the extent that there was an exaggeration of the risk of the Vessel listing and sinking or there was reliance on the carrying out of work or the incurring of expense for which a separate charge was made), might cast some doubt on whether it was indeed reasonable to impose such an uplift but if there was other positive evidence that persuaded me that such an uplift was reasonable, the fact that not all of the reasons given by the Claimant to justify the uplift at the time or indeed at trial were valid does not prevent a finding that the uplift was nonetheless reasonable.

The critical evidence on this aspect was that of Mr Erkanat as to the difficulties that the Claimant confronted in discharging the containers from the Vessel and from Mr Pugh as to his experience in a situation like this. Mr Pugh dealt extensively with the factors which generally justify an uplift on a container port’s usual tariffs at sections 8-10 of his report and concluded that a 70% uplift on the Claimant’s normal charges was entirely reasonable. He also confirmed in his oral evidence that what he said about the reasonableness of the uplift applied even if all exceptional additional costs were separately paid for. He expressed that view with knowledge of the additional costs which the Claimant sought to recover on top of the uplift, on which he commented specifically in later sections of his report. At the outset of his consideration of this topic he stated as follows:

“8.3

The normal practice for determining the rate to charge for the Terminal Handling Charge on a one-off call would be to apply a standard base rate charge using the port’s general tariff plus an “uplift” depending upon the circumstances of the vessel’s call.

8.4

That “uplift” could either be negotiated by the parties in advance or, particularly in circumstances where the full details of the operation were not known by the port in advance, could be set afterwards by the port. At that stage the port will know what was involved (and in particular the danger and difficulty levels) and will have a fairer idea of what it is reasonable to charge.

8.5

This case is typical of a situation where, since the condition of the vessel and containers was unknown prior to berthing and discharging, I would have expected the “uplift” only to be fixed after completion of the operations.

8.6

In addition, in the case of a one-off emergency call such as this it is my opinion that the highest rate of charges would generally apply.”

When cross-examined, Mr Pugh gave an example of a situation in which he had been previously involved. There had been a fire on a container ship caused by undeclared cigarette lighters, which had self-ignited in very hot weather. The fire had caused damage to the structure of the vessel, resulting in a need to remove all of the containers on board the ship so that it could go to dry dock. About 70% of the containers were smoke damaged and about 20% of the containers were fire damaged. The fire had primarily been on the deck of the vessel but had spread to one bay. Smoke had affected four other bays but this did not impact on the discharge of the vessel. The discharge was hazardous because some containers were still smoldering and a few caught fire when they were landed. The port had to bring in special staff to deal with these hazards. He considered that the vessel posed fewer risks than were posed in this case and that the handling of the containers was far more straightforward than in this case in that, apart from two or three, all were lifted straight on to spreaders and only a few were distorted. Doing the best he could to remember, his recollection was that after the event an uplift of somewhere between 55 and 60% was agreed with the ship owner and that a separate charge was raised for the special staff that the port had to bring in. He emphasised that the port at which this occurred, Jebel Ali in Dhubai, had ample storage space, with the result that there had been no need to factor in any exceptional work or expense to cope with the storage of so many additional containers resulting from this unscheduled discharge.

Mr Smith sought to downplay this evidence on the basis that this was simply a negotiated uplift but it seems to me that this evidence provides material support to Mr Pugh’s conclusion as to the reasonableness of the 70% uplift being imposed and being imposed in addition to the other specific costs which the Claimant seeks to recover. An arm’s length negotiation between two participants in the industry, Jebel Ali port and Maersk, which to the best of Mr Pugh’s recollection was the ship owner, is a very good indication of what would be a reasonable uplift in the situation outlined by Mr Pugh.

Having read and listened to Mr Erkanat’s evidence, whilst there are some similarities between the urgency and unplanned nature of the visits of the vessel in the example given by Mr Pugh and of the Vessel in this case, I have no doubt that the task confronting the Claimant in this case was far more difficult. As regards the undamaged containers, Mr Erkanat gave evidence about how the discharge lists constantly changed. In paragraph 83 of his witness statement he said:

“The stability of the vessel was being constantly monitored and checked by the Master and Chief Officer and they were clearly concerned as to the vessel’s stability.”

He explained to me that this evidence was based on the fact that discharge lists do not usually change and that he had drawn the inference that the constant changes in the discharge lists could be attributed to a concern over stability. Mr Pugh confirmed that constant changes in the discharge lists would affect the speed of discharge and the order of discharge would affect storage arrangements. This was a critical factor in circumstances where the Claimant had limited storage space available and would have been more critical when the instruction to discharge the entire Vessel was given. As I have indicated, that was not a factor which affected the discharge at Jebel Ali about which Mr Pugh gave evidence, because he told me that the storage area at Jebel Ali was vast.

Mr Gardiner speculated that the change in the discharge lists could have been due to the Quay Cranes operating at different speeds but he acknowledged that the fact that the Vessel’s auto-heeling was out of action could have been a factor. He suggested that ordinarily the stability of a ship could also be maintained by manual use of ballast pumps but I note that Kalimbassieris’ survey report refers to damage to ballast piping.

On the balance of probabilities, I conclude that the reason that the discharge lists were changing constantly was that there was genuine concern about maintaining the stability of the Vessel in circumstances where the damage to the Vessel had resulted in the need to micro-manage the discharge of the containers so as to maintain stability. That was certainly Mr Pugh’s explanation for the constant changes.

Although in his Closing Submissions Mr Smith sought to suggest that the discharge in ordinary circumstances would have taken between 1.43 days and 1.9 days, making the point that as the discharge in fact took 5.2 days, it was “only” between 2.72 and 3.6 times longer than it ought to have been, that only serves to reinforce the point that the discharge took far longer than it would have done had the Vessel and containers been undamaged.

I also consider that the following factors identified in the evidence before me contribute to the justification for the imposition of this uplift together with the additional charges raised:

Mr Smith sought to suggest that as the Claimant was not operating at full capacity, the extra work and time that was involved in discharging this Vessel because of its damaged condition and damaged containers should not attract an uplift because the port might otherwise have been idle. I do not follow the logic of this argument. The Claimant provided a service to the Defendants and is entitled to be paid for that service. In assessing a reasonable price for that service, one is entitled to take into account how much work and time was involved in providing the service and the circumstances in which the service was provided. Taking those factors into account, a 70% uplift on top of the additional charges for exceptional expenditure was reasonable.

Accordingly I allow the sum of US$910,260 for the discharging of containers other than the 49 damaged containers.

ISPS Security Costs

Clause 2.5.2 of the Claimant’s Terms and Conditions provides in relation to ISPS that:

“This fee is standard for every container that is loaded or discharged (full or empty).”

There is nothing in the Terms and Conditions which prevents that per container fee from being at a rate which includes a 70% uplift and as I have concluded that the effect of the Claimant’s Terms and Conditions is to permit an across the board uplift (as well as additional charges) when the Claimant has to discharge damaged containers and/or from damaged vessels, there is no reason why an uplift should not be applied to this element as well. As I have concluded that a 70% mark-up is reasonable and there is no challenge to the base figure, I allow the sum claimed of US$96,040.

Hatch Cover Moves

Again, the only challenge is to the 70% mark-up and in the circumstances I allow the full amount claimed of US$26,427.

Lashing and Unlashing

As the only challenge is to the 70% uplift, I allow the full sum claimed of US$19,920.

Removal of Twistlocks

Again, the only challenge to this claim is that it includes a 70% uplift and accordingly I allow the sum claimed of US$32,968.

Berthing Dues

The Defendants do not challenge the Claimant’s entitlement to the core berthing dues but challenge the uplift of 70% that was applied to reach the figure of US$17,898.96. For the reasons given above, the Claimant was entitled to charge that uplift.

An additional US$12-13,000 has been added to the berthing dues to cover the extra cost of discharging MSC Diman at Berth 4 at Yilport rather than Berth 1, which was the main berth and was the berth at which the Vessel was being discharged. Mr Erkanat’s evidence was that although in the event the MSC Diman berthed at 07.30 on 10 April 2010 and departed at 06.00 on 11 April 2010, this was because it had arrived early. He told me that the Claimant would have been entitled to make her wait until her allotted slot at Berth 1 at 14.00 on 11 April 2010 but because there were already doubts as to whether the Vessel would be able to depart from Berth 1 by the originally agreed time of 14.00 on 11 April 2010, it was arranged that MSC Diman would call at Berth 4 instead so as to avoid delaying its discharge. Although this meant that the departure of MSC Diman was not ultimately delayed, it still meant that her discharge took longer because discharge at Berth 4 was slower and so was more expensive for the Claimant to conduct. The estimate for the extra expense is US$12-13,000.

I accept Mr Erkanat’s evidence on this aspect and accept that the diversion of MSC Diman to Berth 4 was caused by the fact that the discharge of the Vessel was probably going to overrun beyond 14.00 on 11 April 2010. In setting the berthing dues, the Claimant is entitled to an enhanced payment in respect of the Vessel remaining at its berth beyond its due departure time and a reasonable basis for the assessment of that charge is by reference to the loss suffered as a result of the prolonged discharge. That causation is established in this case because Mr Erkanat’s concern that the Vessel would not be able to leave its berth on time was well-founded.

The remaining US$60,000 was added on the basis that the Claimant had had to turn away two general cargo vessels which had sought to call at short notice. By reference to reports to him by the port’s general manager, Mr Erkanat’s evidence was that one of the enquiries was for a possible berthing on 9 April and the other enquiry was for a possible berthing on 11 or 12 April 2010. I have no reason to doubt that evidence. Mr Erkanat therefore agreed that the loss of one of those vessels had nothing to do with the Vessel remaining beyond the agreed time. Mr Lewis submitted that this does not alter the fact that there was a loss in respect of both vessels which resulted from accepting the Vessel in the first place and which the Claimant was entitled to include in working out the berthing dues. Mr Smith submitted that these items should not be allowed because the Claimant was in any event earning from the berthing and discharge of the Vessel.

I can see the relevance of Mr Smith’s argument to the first vessel but it seems to me that the Claimant was entitled to take into account its loss in respect of the second vessel which arose because the Vessel had not completed its discharge and departed by the originally agreed time. On that basis, I would allow US$30,000 rather than US$60,000.

That means that under this head I allow in total US$60,000. Having regard to what Evyap was proposing to charge the Defendants in the event that the Vessel failed to depart by the stipulated time, an additional charge of US$42,000 over and above the core uplifted berthing dues, calculated on the basis explained by Mr Erkanat by reference to the fact that the discharge was going to and did extend beyond the time at which the Vessel was due to leave, seems to me to be very reasonable.

Invoice 284818:

Cost of Preparing Construction Site

The first issue is whether the Claimant is entitled to charge for the cost of preparing what had been a construction site for the construction of new facilities for the port for use as a temporary storage area.

A number of the Defendants’ Witness Statements refer to Mr Yildirim having mentioned at the meeting on 7 April the limited storage space that was available at the port terminal (paragraph 21 of Mr Meyer’s Supplemental Statement, paragraph 9 of Mr Coskunsu’s Witness Statement and paragraph 7 of Mr Stevens’ Witness Statement). It is fair to say, however, that the discussion at the meeting on 7 April was in the context of the discharge of a limited number of containers and so the problems posed by having to discharge all of the containers would not have needed to be addressed. However, Mr Erkanat’s evidence was that when he was told that all of the containers had to be discharged he informed Mr Meyer in general terms about the need to transform the construction site into a storage area and about the fact that the companies working on the construction contract would charge the Claimant for the delay caused. His evidence in his witness statement as to Mr Meyer’s response was as follows:

“Mr Tony Meyer confirmed that Owners were ready to pay those expenses which occurred due to the change caused by the Owners – this confirmation was verbal being given on Friday 9^th April and repeated during the weekend … Mr Tony Meyer confirmed for such work to be done, saying “Do whatever you have to do.”

In his oral evidence, he confirmed that he did not talk in detail about the contractors or their rates but just referred to the need to prepare the site and to the fact that costs would be incurred, to which Mr Meyer agreed.

At paragraph 63 of Mr Meyer’s Supplemental Witness Statement, he denies having agreed to pay the daily contract rate of the Claimant’s landfill contractors and says that he had no knowledge of such contractors or their “rate”. He also denies agreeing to pay for a temporary hardcore base on the site or having said “Do whatever you have to do”. In oral evidence, Mr Erkanat refuted what Mr Meyer said in his Witness Statement.

Apart from the fact that I have seen Mr Erkanat giving evidence and have found him to be a reliable witness and that Mr Meyer was not called to give evidence before me, I would in any event have considered it to be quite remarkable if there was not a conversation of the nature described by Mr Erkanat between him and Mr Meyer. It was a truly exceptional thing for the Claimant to have had to order a cessation of construction work on the site and give instructions for it to be levelled and for a layer of temporary hardcore to be laid. I cannot imagine what possible reason there would have been for Mr Erkanat not to mention this to Mr Meyer or for him not to mention that there would be cost implications. I am sure that Mr Erkanat would have escalated the matter had there been any dispute as to the Defendants’ willingness to pay for the costs of this work. Furthermore, from the photographs I have seen and as confirmed by Mr Erkanat in his evidence, it would have been obvious to all those on the Vessel what was going on on the construction site and I would have expected Mr Meyer to have raised the implications for the Defendants of what the Claimant was doing if Mr Erkanat had not already raised it with him. I therefore have no hesitation in rejecting Mr Meyer’s denial of the exchanges with Mr Erkanat about which Mr Erkanat has given evidence and conclude that what the Claimant did in relation to the construction site in order to provide additional storage space was done with Mr Meyer’s knowledge and consent and on the basis that Mr Meyer well understood that there would be cost implications for the Defendants.

In those circumstances, a contention that there is no contractual entitlement to recover these costs would be somewhat disingenuous. In the context of Mr Erkanat’s evidence, I consider that the Defendants would be estopped from denying the Claimant’s entitlement to recover their reasonable costs but in any event:

The construction costs are made up of two elements. The first is construction costs for the levelling of the site and laying temporary hardcore of US$255,338. The balance is attributable to penalties payable to the contractors on the construction project.

There are invoices from contractors in respect of the work that was carried out. Mr Smith sought to attack this figure by reference to the pricing on other unrelated contracts but I am not persuaded that they are relevant to the circumstances of this case. Having regard to the fact that it was carried out as a matter of urgency and included weekend working, I have no cause to doubt the reasonableness of this work or the amount paid.

As regards the penalties, Mr Erkanat was asked about the absence of evidence of payment of these sums and he explained that they had not been paid because the contractors had been prepared to await the Claimant’s recovery of these sums from the Defendants before payment was made to them. Although such an arrangement would be unusual, there is no doubt that the contractors were entitled, in the circumstances, to raise penalty charges and I have reached the conclusion that I should accept Mr Erkanat’s answer in this regard. I therefore accept that these penalty charges are genuine and legitimate liabilities of the Claimant.

However, the Defendants have raised queries as to the quantum of the liabilities. The first point made was that the invoices extend to 20 April but discharging operations were completed on 14 April. This is a bad point because the evidence was that the site had to be used for storage until the containers could be loaded onto a vessel on 20 April. The second point taken was that the period of the penalties included weekends but the validity of that point was refuted by Mr Erkanat’s evidence that the contractors did work at weekends. A more promising point in relation to the Geoteknik claim was that the contract allowed for two days’ grace before the penalty charge kicked in and that had not been allowed for in Geoteknik’s invoice. Mr Erkanat’s explanation was that the two day period of grace did not apply if the period of delay was in excess of two days but that was not consistent with the contractual documentation. In its Closing Submissions, the Claimant also accepted that there were some minor discrepancies between two of the contracts and the penalty invoices amounting to 11,000 Turkish Lira (“TL”) plus KDV (the Turkish equivalent of VAT) and about 4,000 TL.

I am not persuaded that Geoteknik were entitled to charge penalties for the first two days of delay and taking that into account together with the discrepancies that the Claimant has acknowledged means that a deduction from the penalties of approximately US$50,000 is appropriate. I do not consider that any of the other points raised by the Defendants are well founded.

In the circumstances, I allow the sum of US$570,000 under this head.

Uplift on Cost of Preparing Construction Site

The sum now claimed of US$310,420 represents a 50% uplift on the sum claimed under (i) above. Of the sum claimed under (i), about US$365,000 represented penalty charges and it is difficult to see what justification there could be for adding an uplift to those elements of the costs. Mr Erkanat sought to justify the sum claimed under this head on the basis that it was to compensate the Claimant for loss of future income from the delay to the construction project, to compensate the Claimant for the extra effort in bringing about the preparation of the site for storage and to give the Claimant some profit for providing the additional storage area. He accepted that ultimately the facility that was being constructed on the site was never completed due to intervention by governmental authorities but at the time the invoice was rendered, there was no reason to believe that it would not be completed.

Mr Pugh considered a 50% mark-up to be reasonable on the basis that there would have been additional costs and loss of opportunity to the Claimant beyond the direct charges made by the construction companies. However, I have to bear in mind that the Claimant seeks separately to recover US$47,520 for its general administration in relation to discharging and/or container movements which is said to relate to the extra work required of senior management by this operation and so it is necessary for me to take into account the risk of double counting. It would not, though, cover the extra administration involved in making the arrangements for the resumption of the construction work after the containers had been removed from the site. The figure of US$47,520 also gives me some sense of the level of cost involved as regards extra administration.

As regards the loss of income, the Claimant had calculated that at US$540,000 but Mr Pugh regarded the assumption of 80% occupancy of the site on which that figure was based as being high (he thought that 50%-60% was more reasonable). The Claimant’s claim also fails to take into account that this site was earning money for the Claimant whilst the containers from the Vessel were being stored on it because the Defendants would have to pay for that storage and so a claim for the full loss of income would be inappropriate. Finally, the Claimant’s calculation fails to take into account that any loss of income would be a loss of future income and whilst the difficulties that ultimately emerged in relation to the proposed facility on this site do not seem to have been known at the time of the discharge of the Vessel, there would necessarily be a degree of uncertainty as to the receipt and timing of the receipt of such future income.

In addition to challenging the quantum of this item, Mr Smith challenged the Claimant’s contractual entitlement to recover it. In this regard, I accept that as a charge that the Claimant is making to the Defendants, the Claimant is entitled to include in its charge as reflecting the cost of the provision of this extra storage space, the cost to it in terms of management time and loss of future income. He also submitted that the loss of future income should be discounted in view of the fact that as events turned out, the facility was not constructed. However, what I am assessing is what was a reasonable charge for the Claimant to have made for its work in April 2010, which must necessarily be based on the facts then known.

Taking into account all the evidence and submissions on this aspect, I consider that the appropriate figure to allow is a 50% mark-up but only on the cost of the construction work done, i.e. excluding the penalties, which means that under this head I allow US$127,669.

Yard Cleaning

The sum claimed of US$37,131 is only challenged on the grounds that it is not contractually recoverable. For the reasons given above, I consider that it is recoverable under the Claimant’s Terms and Conditions.

Invoice 284788

The sum claimed of US$315,830 for container movements was challenged by the Defendants on the basis that it included a 70% uplift. The assumption that it included such an uplift was not unreasonable because it was shared by the Claimant’s Counsel. However, as explained in the Claimant’s Closing Submissions, it does not include an uplift and so that issue does not arise.

Mr Pugh had no hesitation in stating that, as a terminal operator, he would have charged separately for all these movements on top of the uplift applied to the discharging of the containers and I accept that the Claimant was entitled to do so. It is therefore a question whether the Claimant has satisfactorily proved its claim. Numerous computer print outs of container movements have been produced but the Defendants criticise those records on the basis that they do not reveal whether the movements were relevant movements, i.e. being movements that were related to this discharge. Mr Pugh was familiar with the format of the information that the Claimant had provided but was unable to ratify the relevance of the movements because this would require a complete recreation of the contemporaneous situation at the yard.

I agree with the Claimant’s submission that the level of precision sought to be required by the Defendants is not required in order for the Claimant to prove its case. It is sufficient that these yard movements are produced and that Mr Erkanat gives evidence, as he has, that to the best of his knowledge these represent the movements made necessary by the discharge of the Vessel. Any uncertainty as to whether all of the movements are movements for which the Defendants should properly be charged can be dealt with by a discount on the figure claimed which reflects the evidence as to the scale of the movements which might not be properly chargeable.

In that regard, I consider that it is right that some discount ought to be made for the fact that some of the movements when the Claimant was discharging containers pursuant to the instruction to discharge those due for Turkish destinations were not movements that the Claimant would ordinarily have charged for and that not all of those earlier container movements were rendered futile by the changed instruction to offload all of the containers. Although I accept Mr Erkanat’s evidence that these Turkish containers would not have been moved to the Inland Container Depot (“ICD”), there remains the prospect that some of those containers may have ended up in the ICD in any event.

On the evidence before me I am satisfied that the vast majority of the container movements with the Claimant’s terminal and to and within the ICD for which the Claimant seeks to charge were attributable to the decision to discharge all of the containers on board the Vessel and that only a very modest discount is appropriate to take into account movements for which the Claimant would not have charged on the basis of the original instruction and which were not rendered futile by the change in the Defendants’ instruction. In the circumstances, I allow US$300,000 in respect of this invoice.

Invoice 102975

This is for the cost of welding work and is in the sum of US$29,500. The issue is as to whether the hourly rate that the Claimant agreed with a third party of US$100 per hour is a reasonable rate for the work. Mr Gardiner considered that a reasonable hourly rate would be US$50. Mr Erkanat’s evidence was that it would not have been possible to find experienced welders at short notice and to work on a Sunday and in the conditions the welders worked in for less than the rate charged. He drew a distinction between the work which was involved in relation to the Vessel and the long-term, planned project work to which the rates quoted by Mr Gardiner applied. In this regard, the rates charged by the Claimant were supported by the Defendants’ witness, Captain Pamuk.

In the urgent situation in which the Claimant found itself, I do not consider that it could be criticised for the rate it agreed for this work. I accept Mr Erkanat’s evidence on this aspect and I allow this invoice in full.

Invoice 284819

This invoice for diving services is in the sum of US$75,013. The disputes on this invoice are as to whether the divers were deployed, whether it was necessary to deploy divers and as to the reasonableness of the rates charged for the divers. Mr Erkanat’s evidence was that divers were in attendance as a precaution and his explanation for others being unaware of their presence was that they were on the scene on a precautionary basis and may well not have needed to put on their diving suits. He also recounted a conversation with Mr Meyer in which Mr Meyer had asked for extra divers to be present in case there was contamination to be dealt with when it emerged that there was oil leaking from damaged containers, to which Mr Erkanat had replied that the Claimant already had divers there. This is borne out by the fact that there is an invoice for the diving services provided to the Claimant. It is also supported by the fact that, as the Claimant observed in its written Closing Submissions, there is documentary evidence that the presence of divers was contemplated as being necessary and that Kalimbassieris did not at the time dispute the presence of the divers but merely whether a reasonable sum had been charged.

As regards the rate charged to the Claimant, whilst it might have been possible for the Claimant to have obtained divers at a cheaper rate had they had the time to be able to search around for alternative divers and haggle over rates, bearing in mind the urgency and timing of the work, as with the welding work, I do not consider that it is unreasonable for the Claimant to charge the Defendants what they in fact paid for this aspect of the work. I therefore allow recovery of this invoice in full.

Invoice 285287

The Cost of an Additional 220 Workers

The sum now claimed is US$105,600. The first question is whether this sum is contractually recoverable and for the reasons I have already given, I consider that it is. Furthermore, I do not consider that there is any double counting in relation to the uplift because I regard the employment of additional staff as being an exceptional additional cost for which the 70% uplift does not compensate the Claimant. There are, however, issues as to the proof of this head of claim, as to its reasonableness and as to its overlap with heads of claim other than the 70% uplift.

The Claimant’s figure of 220 members of staff was based on an additional 15 men at each of the four Quay Cranes per shift, 180 in all per day and an extra 40 staff in the yards. Mr Erkanat said that the figure was an average, in that some days there would be more and some days there would be less. He estimated that of the 180, 160 would be clearing, collecting material, removing contents and discharging containers and about 20 would be extra drivers and tally men. He gave figures for the number of people necessary to deal with damaged or wet containers which worked out at an average of about 5 per container. He also explained how extra people were necessary in storage areas to organise the storage. Having heard Mr Erkanat’s evidence about the difficulties that confronted the Claimant in dealing with the Vessel and its container cargo and in having to store so many containers without prior notice in confined and limited space and in circumstances where the access to the ICD had to be by lorry over public roads, I have no hesitation whatsoever in finding that the Claimant simply could not have coped with all this without significant numbers of extra staff. In principle, therefore, the Claimant is entitled to include in its charges to the Defendants a sum reflecting its additional expenditure.

The first problem with which I am confronted in dealing with this claim is as to the reliability of the numbers given by Mr Erkanat. No records of employment were produced and Mr Erkanat’s explanation is that the workers were casual workers who had to be paid in cash. Furthermore, it seems to me to be clear from Mr Erkanat’s evidence that the figure of 220 additional staff is an estimate based on averaging out over a period of time. Mr Pugh, whose evidence I accept on this aspect, was of the view that on the face of it the number of extra staff appeared to be excessive but he still thought that virtually double the number of normal labour would be required (the total additional labour, including additional sub-contractors, was 262 – 87 extra staff per shift at any one time, whereas on Mr Pugh’s evidence he would have been able to cope with 64 extra staff per shift).

One must add into the equation an allowance for double counting. Mr Erkanat acknowledged that there might be a degree of overlap in the charges for additional labour under this invoice and the charges levied for yard moves/shifts and for stevedoring the badly damaged containers, to the extent that these charges including labour costs, albeit that it is right to say that insofar as those charges included work covered by the Claimant’s usual labour, there would not be double charging.

As I have indicated, I am satisfied on the balance of probabilities that the Claimant did employ and need to employ a significant number of additional staff but I am not satisfied that the figure of 220 additional men is an accurate figure, as opposed to being Mr Erkanat’s rough estimate, based on averaging, of the number of additional men working at the site. I accept that it would be wrong to judge with hindsight the number of men that the Claimant employed because the circumstances did not permit the Claimant the time to plan carefully for this discharge and so I would not discount the figure simply on the basis that the Claimant might have coped by merely doubling up on its manpower. In the light of Mr Pugh’s evidence, I do not consider that the Claimant could have coped with anything less than doubling up its manpower and I am satisfied on the balance of probabilities that the Claimant did have, on average, somewhere between 64 and 87 additional workers per shift (including the 42 subcontractors) but the fact that I cannot be satisfied on the balance of probabilities that the number of additional workers was as many as 87 per shift means that the sum claimed must be discounted. It also falls to be discounted for the possibility of double counting on container moves but that discount only needs to be very modest because I accept Mr Erkanat’s evidence that only a small proportion of the additional labour was involved in that aspect and because the labour charge for additional movements would include the labour charge for the Claimant’s usual staff. In the circumstances, I intend to allow 75% of the sum claimed under this head, which amounts to US$79,200.

Cost of 42 Sub-Contractors

The sum now claimed is US$40,500. Mr Erkanat’s evidence is that an additional 14 men per shift were engaged specifically to assist in the discharge process and in particular dealing with the contents of damaged containers. This type of cost is accepted by the Defendants as being covered under clause 3 of the LOU under stevedoring. The Defendants make the point that there is no real information as to how many of these men were actually working at any given time. In particular, the Defendants make the point that on 9, 10 and 11 April (until 11.00 hours), undamaged containers were being discharged from the Vessel and hence no workers were required to perform any tasks in relation to the damaged containers. There is also the possibility of some double counting with the stevedoring charges. Although I accept in principle Mr Erkanat’s evidence as to the employment of these sub-contractors, I again consider that a discount is appropriate in light of the foregoing points and I therefore propose to allow 75% of the sum claimed, i.e. US$30,375.

Transportation and Food Costs

This is parasitic to the above labour costs and is recoverable on the same basis. In light of my above allowance of 75% of the sums claimed, I allow 75% of the sum claimed of US$20,300, i.e. US$15,225.

Administrative Costs

This represents the additional sums payable to the Claimant’s managers to cover the longer than normal hours that they had to work during the discharging operations. It is right to say that there are no documents to prove the payment of the sums or time sheets to prove the extra hours worked but it seems to me to have been likely, having regard to Mr Erkanat’s evidence as to the task confronting the Claimant, that the Claimant’s managerial staff would have had to work longer than normal hours and I would expect them to have been paid for this additional work. I therefore accept Mr Erkanat’s evidence as to the additional payments made to the Claimant’s managers. As an additional expense associated with the discharge it is recoverable for the reasons I have already given and having regard to the exceptional nature of these additional payments, I do not consider that they ought to be treated as forming part of the Claimant’s overheads for inclusion in their uplifted tariff, as was suggested by the Defendants. I therefore allow the sum claimed of US$47,520 in full.

Invoice 40875:

Cost of Storing Damaged Containers

There were a number of specific objections taken by the Defendants. The first was the application of a 70% uplift on the usual storage tariff. Whilst not all of the factors justifying an uplift on the discharge tariff would be applicable to storage, there were additional factors in relation to the storage which make up for the inapplicability of those factors. Most obviously, there was the huge logistical task in dealing with the storage of so many containers, for which storage locations had to be found in circumstances where the Claimant had not been able to plan for the discharge, discharge lists were constantly changing and, as a result of the discharge of the entire cargo, the Claimant was suddenly confronted with having to store a mixed cargo of containers for import and containers for transshipment, which, as Mr Erkanat explained to me, creates particular storage issues.

The Defendants also raised an issue as to the storage of 29 damaged containers and in particular the claim for the cost of void slots around those containers. In his evidence, Mr Erkanat explained how that aspect of the claim had been calculated by members of the Claimant’s staff with more technical knowledge than he had and during the course of a trial a document was produced to me showing how the calculation for void slots had been made. Mr Pugh’s evidence was in fact that damaged containers could potentially take up the equivalent of 23 extra slots. For the purposes of the long-term storage charges, Mr Erkanat told me that the 29 containers, which contained rotting contents, had been stored at the far end of the construction site while awaiting inspection and destruction and were only charged on the basis of occupying a single container slot in any event. On the basis of the Claimant’s evidence, I accept that the Claimant’s charge in respect of the storage of these containers was reasonable.

The Defendants also challenged the cost of US$1,000 for cleaning two containers on the basis of Mr Gardiner’s evidence but for the reasons I have already given I am not able to give any weight to Mr Gardiner’s input in this regard.

In the circumstances, I allow the full sum claimed of US$267,105.

Stevedoring Costs

No objection in principle was made by the Defendants to these charges but they asserted that the sums claimed were excessive. The Defendants have also asserted that there would be double recovery if I was to allow these charges and the 70% uplift on the discharge rate and that there is double counting in respect of the labour involved in these tasks in light of the sums claimed under Invoice 285287.

For the reasons given above, I do not consider that the 70% uplift on the discharge rate represents compensation to the Claimant for the specific additional expenditure represented by this head of claim. As regards the overlap with Invoice 285287, I have made what I consider to be the appropriate reduction to allow for the risk of double counting under Invoice 285287.

As for the level of the charges, the Defendants’ case was premised on Mr Gardiner’s calculations. I did not find his approach to be helpful or persuasive and, as I have observed, I do not consider that he has the relevant expertise in this area. Mr Pugh’s approach was more practical, as I would expect from someone with his experience. He said that he simply took an overall view of the level of charge compared to what he would charge at his own terminal having regard to the way in which he would have undertaken this task. On that basis, he did not question the reasonableness of the charges made. Mr Erkanat asserted that the charges were justified by the fact that the work was difficult and dangerous, by the time and skill taken to complete these tasks and by the urgency of the operation.

On the basis of the evidence of Mr Erkanat and Mr Pugh, I consider that these charges are reasonable and I allow the sum claimed of US$207,952 in full.

Cost of Repairing Damage and Wear to the Claimant’s Equipment

Of the sum claimed of US$120,650, the Defendant accepts liability for repairs to the Quay Cranes and for the software updates that were necessary for this task in the sum of US$67,690. The Defendants also accept liability for the cleaning of equipment, which represents part of the sum of US$28,960. However, the Defendants deny the element of that sum which relates to repainting of equipment and also deny liability for the sum of US$31,000 claimed for Panzerbelt repairs.

As regards the Panzerbelt, there was an issue as to whether a Panzerbelt could require repainting but it became apparent from Mr Erkanat’s evidence that this item related to the channels beneath the Panzerbelt. The other issue on this item was that the invoice has a handwritten alteration to the original date, which appears to have been a date in May, so as to cause it to bear a date of 6 April 2010, before the Vessel arrived, on which basis it is asserted that this work must have pre-dated the arrival of the Vessel and would not be claimable. The Claimant submits that it is more likely that the original May date is the correct date because it is unlikely that anyone would have changed the date to a date before the arrival of the Vessel in order to vouch this claim and this was a claim which remained unitemised contemporaneously, consistent with the Claimant waiting to know the cost once the work was done and invoiced. I accept those submissions which are supported by the fact that what happened during the course of this discharge, with quantities of seawater escaping from containers as they were being discharged from Holds 4 and 5, make it likely that work such as the repainting of the channels beneath the Panzerbelt would be necessary.

As for the need for repainting, the invoice describes the repainting of equipment and of the Panzerbelt as being due to corrosion and damage caused by the seawater from the containers. The fact that so many containers were submerged in seawater as a result of the collision and that seawater would have been draining from the many containers affected by the flooding of holds 4 and 5 as they were discharged from the ship and then moved around makes it likely that the Claimant’s equipment was affected by seawater (which was sometimes polluted by the contents of the container, as Mr Erkanat described in his evidence), so as to justify the repainting of the channels of the Panzerbelt and other equipment.

In the circumstances, I allow the sum of US$127,650 claimed under this head in full. Conclusion

I therefore find that the charge that the Claimant was entitled to make against the First and Second Defendants was US$3,059,955, which means that after deduction of the US$2,000,000 paid by the First and Second Defendants on account, there is a balance of US$1,059,955 due from the First and Second Defendants to the Claimant for which the Claimant is entitled to judgment.

Although I have held that the Third Defendant does not have a general liability for the Claimant’s charges, there are items which in my judgement fall within the ambit of the LOI. In particular, under Invoice 408475, the Third Defendant is liable under the LOI for the costs of the cleaning and repair of the Claimant’s equipment which was damaged and/or contaminated during the course of the discharge of the Vessel. These items are included within the sum of US$127,650 which forms part of Invoice 408475. However, the LOI would not extend to the software update which accounted for US$10,400 or to the precautionary crack detection tests, which accounted for US$4,000. The remainder of the heads of claim would be encompassed by the LOI in that the expenditure was necessary and appropriate in order to deal with damage to the equipment. If the paintwork of the equipment was affected by seawater, it would have to be cleaned before it could be repainted and in that way the cleaning would form part of the cost of repairing the damage. This means that the sum of US$113,250 is recoverable under the LOI from the Third Defendant. The costs of preparation of containers for Customs’ inspection is not covered by the LOI as this only covers “any delays, penalties or fines caused by or raised by the Customs Authorities” and does not extend to expenditure incurred in order to facilitate Customs’ inspections. Accordingly, the Claimant is entitled to judgment against the Third Defendant for US$113,250.