Fal Oil Company Ltd and Credit Agricole Indosuez (Suisse) SA v Petronas Trading Corpn Sdn Bhd; the Devon
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morison |
| Judgment Date | 10 October 2003 |
| Neutral Citation | [2002] EWHC 1825 (Comm),[2003] EWHC 2225 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2001 Folio No. 1018 |
| Date | 10 October 2003 |
[2003] EWHC 2225 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Morison
Case No: 2001 Folio No. 1018
Mr R. Millett QC (instructed by Ince & Co) for the Claimant
Mr L. Akka (instructed by Holman Fenwick & Willan) for the Defendant
Hearing dates : 7–14 July 2003
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
There are two issues before the court. First, have the defendants [Petco] established on a balance of probabilities that the cargo of oil which they received on board the DEVON from the cargo tanks of the CENTAUR during a ship to ship transfer [STS], contained more then the permitted level of water? Second, what is the nature of the contractual liability for demurrage and are Petco liable to the Claimants [Fal Oil] for it? The first issue is much the more important. The parties have engaged two distinguished experts who disagree. The case was well argued and the quality of the evidence was high. There is one witness, Mr Pantouvakis, a cargo examiner employed by Saybolt Oman whose credibility and competence is, indirectly, in issue. Saybolt were appointed by both parties to attend the STS and make measurements and take samples on both vessels.
The places involved in this dispute are Yanbu, a refinery and port in Saudi Arabia in the Red Sea where the CENTAUR was loaded with the cargo; Port Sudan, a Yemeni port, also in the Red Sea, outside which the STS took place; the Caltex oil terminal in Singapore Harbour where discharge commenced; the Feoto Terminal in the port of Pasir Gudang, Malaysia, where the cargo was finally discharged.
Findings of fact in relation to the contamination issue.
The CENTAUR was constructed in 1975. At the relevant time she had ten cargo tanks [6 centre tanks and two on either side, together with 2 slop tanks one on either side] available for cargo. There are four segregated ballast tanks (for ballast water), two on either wing. CENTAUR is a 42,585 gross tons oil tanker. DEVON was built a year later with a slightly higher gross tonnage of 44,993. She had 9 cargo tanks, two slop tanks and four ballast tanks: 2 forward and 2 midships. The cargo was approximately 75,000 tons of high viscosity oil. Its viscosity gives the cargo a density similar to water, namely 1. The weight of a cargo is calculated by multiplying the cubic metric volume of the cargo by its density. For all practical purposes, in this case the weight of the cargo is equivalent to its volume in cubic metres. Even with a cargo of this density, water is marginally more dense, and, if in the cargo, will tend to settle down in the bottom of the tanks.
There are three ways in which a cargo can be sampled: a running sample where an open sample can is lowered through the tank and then retrieved; a spot sample where a closed can is lowered to a particular spot and its cork is then removed and the sample taken from that particular point; a line sample where a valve is located on a line through which the oil is passing whilst being pumped from one location to another [especially from or to shore tanks] diverting a sample to a tap from which the sample is then drawn.
The cargo originated from Yanbu. The shore tanks there were inspected by Saybolt, a well recognised and respected company which, amongst other things, carries out inspections of this sort of cargo. Two inspection certificates of quality were issued by Saudi Aramco-Mobil. The oil had been tested at the refinery laboratory. Both certificates were stamped and countersigned by Saybolt's Saudi Arabian offices. These certificates show that the water and sediment content of the oil in the shore tanks was 0.2% compared with the contractual specification, which permitted a level of water up to 1% of the volume of oil.
According to a bill of lading dated 25 February 2001, a total of 75,363.23 tonnes of the oil was shipped. Immediately prior to loading, the cargo inspectors checked CENTAUR's tanks. They found a minimal amount of cargo left in the tanks, and no free water was found. After loading, the vessel's tanks were inspected and the measurements showed that there was slightly more oil loaded than recorded on the bill of lading, but the difference was small and well within the tolerances for this type of bulk cargo.
CENTAUR anchored off Port Sudan shortly after noon on 26 February 2001, and was boarded by Mr Pantouvakis, a cargo inspector employed by Saybolt's Oman Office, about three hours later. He had had to fly to the Yemen in order to carry out his inspections during the ship to ship transfer. He had spoken to Captain Nannos, who was in charge of Fal Oil's shipping operations. The latter did not come to give evidence, he refused to do so having ceased to be employed by the Claimants nearly two years ago. I can understand him not wishing to become involved in a matter which took place shortly before he left his employment. But his absence is regrettable and, apparently, rather sudden —a decision he took a week or two before the trial was to begin. As he is an overseas witness his written witness statement was admitted into evidence, for what it is worth. On the question whether there was anything unusual or suspicious about Fal Oil asking the surveyor to call Captain Nannos "just to confirm all is OK" the evidence is clear. First the request was made in the context of travel arrangements: "We understand surveyor is going to get the flight on Thursday 22 February, however, before embarking the 'plane, surveyor is to call Captain [Nannos] just to confirm that all is OK". Second, this was a request made on 20 February, before CENTAUR had sailed from Yanbu. Rather than have the surveyor wait around for the vessel's arrival at the STS point, it was sensible to request that he telephone the Claimants' operations department to check that what was planned was in fact going to occur. Third, Mr Pantouvakis, whose evidence I accepted as the truth on this issue, is a professional cargo examiner and he confirmed that this was what the telephone conversation was about and said that such requests were quite normal. Finally, the instructions to the surveyors contained in this telefax transmission were sent to the Defendants' Dubai Office. There was nothing covert about it. Fal Oil confirmed in evidence, [Mr Babrawalla, the senior trading manager at the time] that this was the first occasion they had come across Mr Pantouvakis, as he was located in Oman and Oman "is not our territory". Petco clearly remain suspicious about Fal Oil's involvement in the contamination of the cargo, but I regard the implicit suggestion that 'special instructions' were given to the surveyor over the telephone behind Petco's back as quite implausible. I did not need Captain Nannos' evidence on this point to confirm this conclusion.
There was a slight swell at the time [about 2 metres] and Mr Pantouvakis was taken alongside the CENTAUR and did not, or did not have a chance to, read the vessel's depth in the water: both because he was taken to the vessel in a boat over which he had no control and was taken straight to the gangway, and because the swell made an external reading of the marks on the hull quite difficult. He therefore relied on what he was told by the crew. The crew gave him the draft figures which pertained when the CENTAUR sailed from Yanbu to the STS. On sailing from Yanbu, apart from the cargo of oil which had been loaded, CENTAUR carried 2,700mts of water distributed between the forepeak ballast tank [1200mts] and two tanks amidships [750mts each]. At some stage she discharged most of her ballast, leaving a total of 70mts. Whether the discharge occurred en route to the STS location, some 23 hours sailing time from Yanbu, or immediately before the STS itself is not known. The effect of discharging the ballast water might, according to Mr Severn, Petco's expert witness, have altered the draft by some 36cms, the recorded draft being 14.15mts fore and aft [even trim] and would have affected the trim. If the trim were affected then the ullage readings would have to be adjusted the cargo tank testing points being slightly aft of center. Mr Pantouvakis was of the view that the trim effect would be "small" "even maybe no change". As he said, he did not have the "ship's particulars, ships plans" but "according to my experience I am not expecting much of the trim difference". In my view, given the sea state the effect on trim might well not have been noticed or noticeable to those on deck taking measurements.
Mr Pantouvakis did not take any samples from CENTAUR's cargo tanks. According to his log or time sheet, he went on board at 15.00 hrs and started his "tank inspections" at 15 40 hrs, completing them at the end of one hour and completing his cargo calculations at 17.00 hrs, around the time when the DEVON was coming alongside. Each of the ten cargo tanks and the two slop tanks were all measured and he calculated the metric tonnage loaded on board this vessel, pre-transfer, as 75,438.548, which is very close to the measurement of the cargo when loaded at Yanbu [75,440.878]. There are no grounds for suggesting that the ullage report which Mr Pantovakis prepared was other than genuine. He has not simply copied the Yanbu ullage figures. It is noticeable that all Mr Pantouvakis' ullage figures are slightly different, as one might expect, from the measurements at Yanbu, where the vessel was moored alongside. The ullage report he prepared confirms that no free water was...
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