Falkonera Shipping Company v Arcadia Energy Pte Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Eder |
| Judgment Date | 20 December 2012 |
| Neutral Citation | [2012] EWHC 3678 (Comm) |
| Docket Number | Case No: 2011 FOLIO 624 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 20 December 2012 |
[2012] EWHC 3678 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Bristol Crown Court
Small Street, Bristol
BS1 1DA
Mr Justice Eder
Case No: 2011 FOLIO 624
m.t. "Falkonera" – c/p 18.11.10
Mr Andrew W Baker Q.C. (instructed by Ince & Co) for the Claimant
Mr David Allen Q.C. and Mr N.G. Casey (instructed by Clyde & Co) for the Defendant
Hearing dates: 5 – 8 November 2012
These proceedings concern the m.t. Falkonera (the "vessel"), a very large crude carrier (or VLCC), which was at all material times owned by the Claimants (the "Owners"). The vessel was built in 1991. Her overall length is 330 metres. Her deadweight is 264,892 tonnes.
The London agents of the Owners' managers are and were at all material times Andros Maritime Agencies Ltd ("Andros"). Embiricos Shipbrokers Limited ("ESL") are and were at all material times exclusive shipbrokers for a number of vessels managed by Andros including the Falkonera. In the course of these proceedings, certain of those vessels have been referred to as "Embiricos vessels" or vessels within the "Embiricos Group" but I should make plain that such nomenclature has no legal significance. It is only shorthand used to refer to vessels whose owners are represented by ESL.
By an agreement contained in or evidenced by a recap email dated 18 November 2011, the Falkonera was chartered to the Defendants (the "Charterers" or "Arcadia") to perform a single voyage to carry crude oil from the Yemen to "1–2 ports far east". The charter was never signed but it is common ground that, as set out in the recap, the charter was on the terms of the BPVOY4 charter form with certain additions/amendments and, for convenience, I shall refer to the agreement between the parties as the "charter".
In the event, the Charterers chose to discharge at Pasir Gudang, Malaysia by way of a ship-to-ship ("STS") transfer. Initially, the Charterers nominated two other VLCCs which the Charterers were using as floating storage units to receive cargo by way of STS transfers from the Falkonera ie the Front Queen— built 2009, length overall 330 metres, deadweight 297,936 tonnes — and the Front Ace– built 1993, length overall 326.2 metres, deadweight 274,999 tonnes. I will refer to these two vessels collectively as the "Frontline Vessels". However, the Owners withheld their approval of these vessels for the proposed STS transfer and the Falkonera subsequently discharged her cargo into other smaller vessels.
In essence, the Charterers say that the Owners' withholding of approval of the Frontline Vessels to carry out the STS transfer was a breach of the charter and led to delay and increased costs which are for the Owners' account.
This judgment is concerned solely with liability. The parties have agreed that all issues of quantum are, if necessary, to be determined separately at a later stage. However, subject to the impact, if any, of such alleged breach of the charter, it is common ground that pursuant to the charter, the Charterers owe the Owners the sum of US$485,688.55, made up as follows viz US$75,608.26 to reimburse additional war risk premium; US$2,031.25 for waiting time at Ras Isa (one of the loading terminals); US$30,769.74 for deviation to avoid the risk of piracy; and US$377,279.30 in demurrage.
The charter
Part 2 of the standard form contained wording in Clause 8 which provided in material part as follows:
"8.1 Charterers shall have the option of transferring the whole or part of the cargo…to or from any other vessel including, but not limited to, an ocean-going vessel, barge and/or lighter (the "Transfer Vessel")…. All transfers of cargo to or from Transfer Vessels shall be carried out in accordance with the recommendations set out in the latest edition of the "ICS/OCIMF Ship to Ship Transfer Guide (Petroleum)". Owners undertake that the Vessel and her crew shall comply with such recommendations, and similarly Charterers undertake that the Transfer Vessel and her crew shall comply with such recommendations. Charterers shall provide and pay for all necessary equipment including suitable fenders and cargo hoses. Charterers shall have the right, at their expense, to appoint supervisory personnel to attend on board the Vessel, including a mooring master, to assist in such transfers of cargo."
The charter also contained by way of addition to Part 1 a specific clause headed " sts lightering clause" which was in the following terms (with numbering added for ease of reference):—
"(i) if charterers require a ship-to-ship transfer operation or lightening by lightering barges to be performed then all tankers and/or lightering barges to be used in the transhipment/lightening shall be subject to prior approval of owners, which not to be unreasonably withheld, and all relevant certificates must be valid.
(ii) all ship-to-ship transfer operations shall be conducted in accordance with the recommendations set out in the latest edition of the ics/ocimf ship-to-ship transfer guide (petroleum).
(iii) all such lightering ships must have a fully working inert gas system (igs), unless the cargo flash point exceeds 60f and only with express approval of the owners/master."
The ICS/OCIMF Ship to Ship Transfer Guide (the "Guide") referred to in both Clause 8.1 and the "sts lightering clause" is a substantial standard reference publication. At the date of the charter, the publication was in its 4 th Edition (2005). That remains the current edition although I was told that a new edition is in preparation.
The main issues
The Owners' primary case was that on the true construction of Clause 8 and/or the "sts lightering clause", VLCC-VLCC transfers were precluded; alternatively that the Owners acted reasonably (or, at least, not unreasonably) in withholding their approval of the Frontline Vessels. (No different issue arises as between the two Frontline Vessels: the point on construction is the same; Owners' alleged factual concerns were the same, and were equally reasonable or unreasonable, as the case may be, as regards both vessels.)
With regard, in particular, to the Owners' primary case on construction, the Charterers relied upon certain oral discussions which allegedly took place in a restaurant and thereafter the Lantern Bar at the Fullerton Bay Hotel in Singapore on the night of 8 October 2010 (ie some 6 weeks prior to the recap) between, in particular, Mr Stephen Gibbons of the Charterers and Mr Philip Embiricos on behalf of the Owners when two other individuals namely Mr Jan Scheepers and Mr Alexander Rocos were also present. In summary, as pleaded in their Defence, it was the Charterers' case that:
i.) During the course of this meeting, Mr Gibbons explained that the Charterers used VLCCs as floating storage units off Singapore to store some of the crude oil it traded; that the crude oil was loaded onto and discharged from the floating storage unit by way of ship-to-ship transfers to and from the carrying vessel; and that those carrying vessels would range in size between "Aframax" and VLCC tankers.
ii.) Mr Philip Embiricos stated that it was his wish that Embiricos VLCCs (ie VLCCs owned and/or controlled by or on behalf of the Embiricos Group) be time chartered by the Charterers to be used as floating storage units in this manner; and that he did not give any indication that the Embiricos VLCCs would not be able to carry out the aforesaid STS operations including by STS transfer operations directly between two VLCCs.
The Charterers submitted that these oral discussions were admissible by way of "factual matrix" alternatively in the event that I were to consider (contrary to the Charterers' primary case) that the wording of the charter was "ambiguous", as an aid to construction of the charter to show that the Owners were well aware of the Charterers' practice of carrying out STS operations between VLCCs and, in effect, to counter the Owners' case that, as a matter of construction, STS transfers between VLCCs were precluded under the terms of the charter. In the further alternative, the Charterers sought to rely upon these discussions on the basis that they would assist in informing the court of the unreasonableness of the Owners' actions in withholding their approval. The admissibility of such discussions was disputed by the Owners but without prejudice thereto, they submitted that although certain discussions did take place in Singapore they were not to the effect alleged by the Charterers and, in any event, were irrelevant to the current dispute.
I should mention that in their Defence, the Charterers also relied upon certain matters allegedly discussed on the telephone in the course of negotiations between brokers immediately before the recap email; but this point was not pursued.
The evidence
On behalf of the Owners, the following provided signed statements and gave oral evidence:
i.) Mr Philip Embiricos. He is a director of ESL. His role at ESL is, amongst other things, to investigate market opportunities and to report back to ESL. The main focus of his evidence concerned the alleged discussions in Singapore referred to above.
ii.) Captain Papapostolou. He first went to sea as a deck cadet and was promoted to Master in July 2004, holding a Greek Class-1 Master of Competency. During his time as Master, he was engaged in some 9 STS transfer operations. He came ashore in 2007 to become the Operations Manager employed by Andros and, as appears below, was directly involved in the decision to refuse approval of the Frontline Vessels.
In addition, the Owners served witness statements from (i) Mr Nicholas Embiricos who has been a shipbroker with ESL since 2003 and was directly involved on behalf of the Owners in fixing the Falk...
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