Saga Cruises BDF Ltd and Another v Fincantieri SPA (formerly Fincantieri Cantieri Navali Italiani SPA)

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMs Sara Cockerill
Judgment Date29 July 2016
Neutral Citation[2016] EWHC 1875 (Comm)
Date29 July 2016
Docket NumberCase No: CL-2014-000002

[2016] EWHC 1875 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

Ms Sara Cockerill QC (sitting as a Deputy High Court Judge)

Case No: CL-2014-000002

Between:
(1) Saga Cruises BDF Limited
(2) Saga Cruises Limited (formerly known as Acromas Shipping Limited)
Claimants
and
Fincantieri SPA (formerly Fincantieri Cantieri Navali Italiani SPA)
Defendants

Mr Charles Holroyd and Mr Stephen Du (instructed by Reed Smith LLP) for the Claimants

Mr Adam Robb (instructed by Curtis Davis Garrard LLP) for the Defendants

Hearing dates: 9, 10, 13, 14, 15, 16, 20, 23 June 2016

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.

Ms Sara Cockerill QC:

Introduction

1

This action concerns two quite distinct claims, both of which arise out of a contract dated 28 September 2011 ("the Contract") between the First Claimant ("the Owners") and the Defendants ("the Yard") for the "Dry Docking, Repair & Refurbishment" of the Owners' cruise ship "SAGA SAPPHIRE" ("the Vessel").

2

The Owners are and were part of the Saga Group of companies; their role was as the owning company of the Vessel. The Second Claimant ("Acromas") is better known as "Saga Shipping". It is another company in the Saga Group which operates Saga Group's cruise business.

3

The Vessel is a 1981 built cruise ship. Formerly called "BLEU DE FRANCE" she was bought by the Owners in November 2010 with the aim of transforming her into the Saga Group's flagship. She was initially bareboat chartered back to her previous owners while Owners worked on a specification and contract for her refurbishment.

4

The contract was placed with the Yard, an Italian company which is one of the largest shipbuilding companies in the world. The price was €14,346,007, and covered both engineering and outfitting works. The work was scheduled to start at the Yard in Palermo on 9 November 2011 and to be completed by 17 February 2012.

5

In fact, the works were considerably delayed, principally by strikes. On or about 16 February 2012, the parties entered into an agreement at Trieste by which they agreed to postpone the Scheduled Completion Date to 2 March 2012 ("The Trieste Agreement"). However, there were further delays and the Vessel was not re-delivered to the Owners until 16 March 2012. The Vessel departed from Palermo on 19 March 2012.

6

On 1 February 2012, the Owners concluded a year long bareboat charter with Acromas, and the Vessel was to be delivered to Acromas under that charter on 30 March 2012 for the purpose of being operated as a cruise ship by Acromas.

7

The first and larger claim in this action relates to events which occurred during the course of the Vessel's inaugural cruise, only a few weeks after completion of the refit at Palermo. As the Vessel was preparing to depart Valencia on 12 April 2012, she suffered a serious failure of the port main engine lubricating oil cooler ("luboil cooler"). Investigation revealed that the tubes of both luboil coolers were heavily corroded, and they were both replaced. Given that one of the items which specifically fell within the ambit of the engineering refit was an overhaul of the Vessel's main engine luboil coolers, the Owners contend that this loss was caused by a failure on the part of the Yard to perform their obligations as regards the luboil coolers to the requisite contractual standard.

8

The Owners contend that the effects of the luboil cooler failure were severe in that (i) the inaugural cruise had to be abandoned and the passengers sent home, and (ii) while Acromas attempted to maintain the Vessel's next scheduled cruise (due to start on 18 April 2012 from Southampton) by re-arranging it to start later and with a shorter itinerary, the luboil cooler repairs were not complete in time and so that cruise also had to be cancelled. All of this, they say, can be traced back to the Yard's default.

9

The claim for damages is pursued not by the Owners but by Acromas, since Owners have assigned to Acromas their rights against the Yard under the Contract in respect of the luboil cooler failure. The claim for damages amounts to £3,170,037 and is brought under the main provisions of the Contract, or alternatively under the guarantee clause, Clause 12.

10

The second of the two claims in this action is a claim for liquidated damages by the Owners under the Contract and the Trieste Agreement in respect of the delay in redelivering the Vessel. Since completion and signature of the Protocol of Delivery and Completion did not take place until 16 March 2012, the Owners claim liquidated damages in respect of the delay between 2 and 16 March 2012. The claim is in the amount of €770,000, which is the amount of a cap on liquidated damages agreed at the time of re-delivery. This is the equivalent of 4.3 days of delay under the Liquidated Damages clause.

11

The Yard advance a number of defences to each of the claims. I will deal with each claim, and the sub-issues which arise in relation to it, in turn below.

THE LUBOIL COOLER CLAIM

Introduction

12

In the context of this claim it is important to have some sense of the purpose of a luboil cooler and the structure of the actual coolers in question.

13

The function of a luboil cooler is to cool the lubricating oil which circulates through an engine. Without a functioning luboil cooler, the corresponding engine cannot be run. In the present case, the coolers served the Vessel's two main engines. There were thus two luboil coolers (port and starboard).

14

Luboil coolers are a form of heat exchanger. The hot engine oil is brought close to cooled water so that heat is transferred from the oil to the water. The coolers in this case were of the "shell and tube" type. In a cooler of this type, a cylindrical shell is closed by bolted cover plates and has two flanged pipe branches (one at each end) serving as the inlet and the outlet for the flow of warm lubricating oil. The fresh water cooling medium enters and leaves through similar flanged branches at one end. Inside the shell is an assembly of parallel small bore (14mm) tubes known as the tube stack or tube nest. At each end, the tubes are fixed into thicker metal "tube sheets" (also known as "tube plates" or "end plates") into which holes have been drilled. They are kept apart along their length by baffles which also help to direct the flow of oil around the tube nest. One end of the luboil cooler is attached to a water box and is referred to as the fixed end. The other end is known as the floating end.

15

The way the process works is that cold water flowing through the individual tubes is strictly separated from the surrounding warm lubricating oil but heat is conducted through the thin tube walls and is absorbed by the water and carried away from the luboil cooler. It is of note in the context of the issues in this case, that the tube walls in these coolers were 1mm thick and of mild steel, rather than the more usual copper nickel mixture.

16

Unless the water is maintained to an almost impossible level of purity the walls of the tubes will tend to become coated in limescale (calcium deposits). This coating will reduce the efficiency of the heat exchange across the tube walls and therefore reduce the efficiency of the luboil coolers. In addition, unless the water is kept absolutely free of chloride ions, steel tubes will become subject to corrosion. Where this occurs holes may develop, allowing the luboil to enter the water tubes. The speed at which these processes occur will depend on the quality of the water passing through the tubes of the luboil coolers. To minimise problems the water should be treated with a chemical inhibitor, and the levels of that inhibitor should be regularly checked and maintained.

17

So far as corrosion is concerned, where a small number of tubes are compromised, they can be "plugged" (ie. have plugs of metal inserted in either end), which effectively take them out of the system. In small numbers there will be no significant loss of the cooler's utility. However once the number of plugged tubes rises it will become necessary to replace all the tubes: to "retube the coolers". The experts in this case were in agreement that if the coolers had copper nickel tubes and were well maintained they might have a life equal to that of the Vessel without needing retubing. These coolers, with their steel tubes, would certainly be expected to require retubing at some point, but if well looked after should have a life expectancy of well over five years and possibly over ten years.

18

In the present case the backdrop to the works undertaken by the Yard on the coolers is that the maintenance history, while not providing much in the way of detail of the maintenance of the coolers, suggests that there had been problems with them going back some years. In the early 2000's there are regular records of individual tubes being plugged. In April 2007, with 25 pipes plugged over the previous 2–3 years and more failing, the port cooler was retubed. In 2002 and 2008 following leakage problems, the starboard cooler was likewise retubed. In usual circumstances therefore the coolers would not have been scheduled for retubing as early as late 2011/early 2012. The evidence of Mr Blinston, who had been on board the Vessel since April 2011 for familiarisation purposes and drafted the engine room refit specification, was that there were no particular concerns about the coolers, but an overhaul was considered important because there was no spare cooler if something went wrong.

19

The other end of the factual background is the failure of the port cooler. Following the refit, the Vessel...

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1 firm's commentaries
  • Concurrent Delay – Further Developments In The Saga
    • United Kingdom
    • Mondaq UK
    • 14 December 2016
    ...Cruises BDF Ltd v Fincantieri SpA [2016] EWHC 1875 (Comm) A recent case has brought concurrent delay, an area of law that continues to spark debate, back into focus. Broadly speaking, concurrent delay occurs where there is delay on a project which is caused both by an event or events for wh......

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