In September this year, an award was rendered in London arbitration on the question whether half demurrage under the Asbatankvoy charter party applied when the stoppage occurred during laytime as opposed to during demurrage.
Two issues were in fact decided in the arbitration. The first dealt with whether there was a breakdown within the meaning of clause 8 of the Asbatankvoy form. It should be noted that this award was rendered before the decision of the Court of Appeal in ”the Afrapearl” the same year, which decided this question. This decision will be mentioned later in this article. Suffice to say here that the tribunal found that there was indeed a breakdown within the meaning of this clause.
Turning to the second issue, the tribunal agreed with owners that clause 8 is an exceptions clause and it is for charterers to bring themselves squarely within it, and any ambiguity would have to be resolved against them. However, the tribunal did not find any ambiguity in the clause. Demurrage was incurred because laytime was exceeded because of the breakdown to the shore’s equipment during laytime. Thus, the resulting demurrage would have to split between demurrage accrued due to the breakdown, which would count half, and demurrage accrued regardless of the breakdown, which would count in full.
In reaching this decision, the tribunal could not rely on any existing authority, but relied instead primarily on another arbitration award, LMLN [1989] 247, London Arbitration 10/89, which reached the same conclusion.
Based on these two awards, we can say that there is at least an indication that a breakdown or another cause contained in clause 8 of the Asbatankvoy form does not have to occur during demurrage to trigger half demurrage, but may also occur during laytime and be completed before laytime ends and still trigger half demurrage for any demurrage period caused by this breakdown.
But what happens if the breakdown occurs before laytime begins and even before conclusion of the charter party?
That was dealt with in ”the Afrapearl” [2003] 2 Lloyd’s Rep. 671 QB and [2004] 2 Lloyd’s Rep. 305 CA. In this case, the vessel was chartered on an amended Asbatankvoy form for carriage of fuel oil from the US Gulf to Dakar. One parcel of the cargo was discharged at the M’bao Sealine.
The relevant clauses of the C/P were set out as follows:
6. NOTICE OF READINESS. Upon arrival at customary anchorage at each port of loading or discharge, the master...shall give the charterer...notice...that the vessel is ready to load or discharge cargo, berth or no berth, and laytime...shall commence upon the expiration of six (6) hours after receipt of such notice...Where delay is caused to vessel getting into berth after giving notice of readiness for any reason over which charterer has no control, such delay shall not count as used laytime or demurrage ...
8. DEMURRAGE. Charterer shall pay demurrage...at the rate specified in Part I...for all time that loading and discharging and used laytime as elsewhere herein provided exceeds the allowed laytime elsewhere herein specified. If, however, delays occur and/or demurrage shall be incurred at ports of loading and/or discharge by reason of...breakdown of machinery or equipment in or about the plant of the charterer...or consignee of the cargo, such delays shall count as half laytime or, if on demurrage, the rate of demurrage shall be reduced one half of the amount stated in Part II ...
9. SAFE BERTHING - SHIFTING. The vessel shall load and discharge at any safe place or wharf, or alongside vessels or lighters reachable on her arrival...
The sealine, to which the vessel should discharge at Dakar had been damaged on at least two previous occasions in 1999 and 2000 and was at the time of the vessel’s arrival in 2001, poorly maintained and had been leaking earlier. The master had detected oil sheen on the surface upon the vessel’s arrival at port and complaints regarding pollution had been received by the port authorities from residents at least a week before. The vessel commenced discharge, but detected leakage and stopped. The vessel was ordered off the berth and returned to anchorage while repairs were carried out. The vessel returned to the sea berth and discharge was resumed, but the leakage continued. The vessel returned to anchorage again and stayed there for eight days while repairs were carried out again. The vessel returned to the sea berth, resumed discharging, but only with one hose and with reduced speed.
As mentioned above, the first question considered in this judgement was whether the gap in the sea line constituted a breakdown within the meaning of clause 8. The High Court decided that the sealine did constitute “equipment” and was “in or about the plant of the charterer”, but the gap was not a breakdown. This was overturned by the Court of Appeal, which found support in an unreported judgement, the Thanassis A. In this case, the court held that,
“The cause of the breakdown is immaterial. It could be some external agent, or it could be some internal defect in the machinery or equipment, but if the machinery or equipment does not function, and possibly if it malfunctions, then there is a breakdown of the machinery or equipment.”
The Court of Appeal in the present case stated that a distinction should be drawn between a breakdown and its cause. A breakdown occurs when the sealine stops functioning as such. Although the court did find on the facts that a relevant breakdown occurred after the vessel arrived in the port, probably due to the manoeuvres of the tug bringing the line’s hoses to the vessel, it also found that even if this had not been the case, a relevant breakdown had taken place some time before the vessel arrived or even before conclusion of the charter party, which would fall under clause 8 of this charter party.
Owners tried to argue that there came a time when the malfunctioning of the sealine was part of the state of affairs in the port and thus the element of fortuity was no longer there In any event,. it was outside what the parties had intended with the reference to breakdown in clause 8. The court dismissed this as too uncertain and applied the doctrine of the Thanassis A mentioned above for the sake of its commercial clarity.
Owners also tried to imply an element of fault on behalf of charterers or the consignee to say that there was only a breakdown in the absence of such fault. Here the court drew a distinction between fault of the consignee and fault of the charterers. In the first case, it held that such a term could not be implied and thus fault on the part of the consignee was irrelevant.
In the second case, it held that fault on the part of charterers was relevant and a term could be implied to the effect that if the breakdown occurred due to charterers’ fault, clause 8 would not apply.
In conclusion, the court held that there was a relevant breakdown of equipment and the question was now if the resulting delay was caused by this breakdown.
Owners attempted to break the chain of causation by firstly stating that the delay was due to failure to repair the sealine within reasonable time. However, since evidence had not been produced by owners showing that charterers were aware of this problem or were at fault in any way, this failure on the part of the consignee did not break the chain of causation.
Secondly, they referred to an expert’s report on the repairs carried out stating that repair, if carried out effectively, should only have taken seven days (less than the period in dispute). [Here it is our firm opinion that there is an error in paragraph 37 of the judgement in that it says that “the evidential burden is on the charterers to show that there was a break in the chain of causation”. Clearly, it should have read “owners” as owners would benefit from such a break, not charterers.] The court found on the evidence that such a break could not be established.
Conclusion
For a breakdown to fall under clause 8 of the Asbatankvoy form and thereby trigger half demurrage for any resulting delay causing demurrage, it is not a condition that the breakdown took place when the vessel was in the port or at the berth, nor that laytime had commenced or that the vessel was on demurrage. As long as the charterers can bring themselves within the doctrine mentioned above and can show that the breakdown caused a delay to the vessel and when owners cannot break the chain of causation by pointing to intervening events, half demurrage will apply.
The court preferred this solution for its commercial clarity, but did give owners one encouragement, so to speak, as fault on the part of charterers render clause 8 inapplicable.
Owners may consider inserting an additional clause in the C/P along the following lines,
“An event shall only be construed as a relevant breakdown within the terms of clause 8 if the breakdown takes place after the vessel has arrived in the port where the breakdown occurs / after entry into this C/P.” Delete as appropriate. This may assist owners in limiting the number of “breakdowns”, which would trigger half demurrage under the C/P, but we emphasise that the wording has not yet been tested by the courts.