Portolana Compania Naviera Ltd v Vitol SA (The “Afrapearl”) – Court of Appeal (Ward, Clarke and Laws LJJ) – 9 July 2004

ASBATANKVOY – BREAKDOWN OF MACHINERY – FAULT OF CHARTERER

Although the sealine was considered ill-maintained, each individual breakdown must be looked at within the context of the governing charterparty – Breakdown, per Cl. 8 of Asbatankvoy, 1/2 demurrage applies /  Shifting expenses not to count.

[dropcap]I[/dropcap]n overturning the High Court, the Court of Appeal (Civil Division) in the case of Portolana Compania Naviera v. Vitol SA – “The Afrapearl” [9 Jul 04] had to consider the difficult question of what constitutes equipment and the circumstances where the Charterers could rely on the half rate provisions of Asbatankvoy, Part II, Clause 8.  Furthermore, the judges had to evaluate Asbatankvoy Cl. 9 and whether, when ordered to shift off of a sealine so that repairs can be conducted to the sealine, the charterer is liable in full for the time and the shifting expenses.

A quick summary of events leading up to this claim is as follows.  The Charterers had instructed the vessel to discharge via the M’bao sealine at Dakar.  This line in the past had leaked on a number of occasions and nearby residents had complained of oil washing up on the beaches.  Upon arrival in port and shifting to the sealine the master claimed that he had observed oil on the surface of the sea.  Part of the problem was that the pipeline end manifold (PLEM) was prone to being pulled out of position by tugs or vessels thus exacerbating the issue with the poorly maintained line.

Now, despite this presence of oil on the surface of the water, discharge was allowed to commence.  In the early stages of the discharge operation the sealine began to leak making it apparent that the pipeline was the cause of the oil slick on the surface of the water.  On three separate occasions during a 19 day period the Vessel was forced off of the sealine while the terminal attempted to rectify the issue.  Finally, at the third berthing the vessel was able to discharge as the final section of the sealine and the end manifold had been replaced by flexible hoses.

As discussed above, the delays in loading were due to oil leaking from the sealine.  Furthermore, it had been reported by nearby residents as well as the Master of the Vessel, when shifting to the sealine, that it was in ill-repair upon the Vessel’s arrival.  In the initial judgement, Mr. Justice Tomlinson concluded that the leaking sealine was a problem that had been allowed to continue unremedied for a considerable period of time and thus could not be considered a breakdown within Asbatankvoy’s Clause 8.  Furthermore, Justice Tomlinson decided the delays to the Vessel were not “delays in berthing” and were therefore not covered by the last sentence of Clause 6 of Asbatankvoy.  Nor was the delay due to the leaking sealine to be mitigated under the guise of time as defined in Clause 7; “…Time consumed by the vessel in moving from loading or discharging port anchorage to her loading or discharging berth,…will not count as used laytime.”  Thus, per Justice Tomlinson, time continued to count during the entire ordeal.

However, despite the supposedly ill-maintained sealine and Justice Tomlinson’s opinion, in reference to Clause 8, the appeals court judges found,

“…[it] necessary to consider whether there was such a breakdown by reference to the facts of the particular case and in the context of the particular charterparty.  Like any provision of a contract it must be considered in the context of the contract as a whole, which in turn must be viewed against its factual matrix or surrounding circumstances.”

In other words, despite the history of breakdowns, individual events must be look at separately and in the framework of the governing charter party. Thus, the appeals court judges laid out the three variables needed before Asbatankvoy Cl. 8 can be utilized and one half demurrage to count during the delays as a result of the leak in the sealine.

      1. Was the pipeline equipment? As I [Clarke LJ] see it, it was part of the equipment used by the consignee to transport the oil from the sealine berth to the shore.  For that short reason I [Clarke LJ] would answer this question in the affirmative.
      1. Was the pipeline equipment in or about the plant of the consignee? It appears to me [Clarke LJ] that the PLEM and the pipeline were part of SAR’s plant and that the part of the pipeline where the leak occurred was equipment in or about that plant.
      1. Was there a breakdown of machinery or equipment? The cause of the breakdown is immaterial and that there is a breakdown if the equipment does not function or if it malfunctions.  The fact that the same failure may have occurred in the past cannot alter its status as a breakdown; it is no less a malfunction simply because it is of long standing.

When making their initial case, Owners never claimed that there was not a breakdown of machinery or equipment but rather that within the context of Cl. 8 this breakdown had not occurred as it was a pre-existing condition long before the charterparty had been created or the Vessel ordered to Dakar.  However, despite the oily residue on the surface of the water, as seen by the Master, and despite the residents’ reports of pollution prior to the Afrapearl’s  arrival, in the past tankers up to about 260 meters had utilized this sealine.  Thus, the justices were inclined to believe,

“that although there was some previous leakage, it is more probable than not that leakage sufficient to prevent use of the pipeline for discharge of the Afrapearl only occurred as a result of a malfunction of the pipe after the arrival of the vessel.”  Moreover, “each time there was a malfunction of the pipe so as to cause excessive leakage and thus not to function as a pipe it can properly be said that there was a breakdown within the meaning of Cl. 8.”

Furthermore, Cl. 8 does not require the breakdown to be beyond the Charterer’s control.

So, it was determined in the appeal, that since prior operations had occurred which utilized the sealine, that most likely, the offending leak which caused discharge operations to cease was caused by either the tug or the Vessel when maneuvering.  As Asbatankvoy does not broach the topic of fault when referring to a “…breakdown of machinery or equipment in or about the plant of the Charterer…” the argument that the Charterers ordered the Vessel to discharge at a supposedly ill-maintained and damaged sealine becomes moot.

Finally, in the appeal the justices ruled that requiring the Vessel to shift off of the sealine so that repairs could occur was not covered in Cl. 9 and Cl. 15 of Asbatankvoy and instead, the Owner was responsible for the costs of the shifting and, per Cl. 8, shifting time was at 50% on account that the shift was during the breakdown period.  In short, Cl. 9 (encapsulating Cl. 15), “is concerned only with a shift from one discharge berth to another discharge berth…” The justices ruled that this is not what occurred in this situation.

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