Can Owners Refuse Charterers’ Order If It May Jeopardize The Safety?

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In CM P-MAX III Limited v Petroleos Del Norte SA (MT Stena Primorsk) [2022] EWHC 2147 (Comm), the Commercial Court of the High Court of England and Wales (the Court) has ruled that an owner can legitimately refuse orders from the charterer where such orders may jeopardise the safety of a vessel. As the owner cannot be satisfied that the vessel could berth and discharge her load whilst remains to be “safely afloat”, the owner may reject the charterer’s request to berth on safety grounds.

The claim

In this case, the claimant (the Owner) chartered a tanker (the Vessel) to the defendant (the Charterer) for a single voyage. The Owner claimed against the Charterer for demurrage in the sum of US$143,153.64. The contract provided for a single allowance of 72 hours of laytime for loading and discharging with demurrage payable at the rate of US$22,500 per day pro rata. The Charterer defended on the basis that the time was suspended because the Owner was in breach of the charterparty (the Charterparty) when the Owner decided to leave the discharge terminal within 12 minutes of berthing on 31 March 2019 and subsequently refused to comply with the Charterer’s request to return on berth at 2100 on 1 April 2019.

The Owner argued that both the decisions to leave and to berth and commence discharge on 31 March 2019 and 1 April 2019 respectively were based on the safety reasons as permitted by the Charterparty and so it did not amount to any breach or fault by the Owner.

The Charterparty

Part 2 of the Charterparty included the following highlighted provisions:

Clause 3(1): “Subject to the provisions of this Charterparty the vessel shall perform her service with utmost despatch and shall proceed as ordered…as she may safely get and there, always safely afloat, discharge the cargo.”

Clause 3(2): “Owners shall be responsible for and indemnify Charterers for any time, costs, delays or loss including but not limited to use of laytime, demurrage,…due to any failure whatsoever to comply fully with Charterers’ voyage instructions… Owners shall adhere to Charterers’ voyage instructions as long as such orders are considered safe by the Master of the ship.

Clause 15: “Any delays for which laytime/demurrage consequences are not specifically allocated in this or any other clause of this Charterparty and which are beyond the reasonable control of Owner or Charterer shall count as laytime or, if Vessel is on demurrage, as time on demurrage.”

The facts

The Vessel loaded cargo of oil at Bilbao and was to head for port of discharge Paulsboro on the Delaware river. Prior to arrival, the Master sought a waiver of the under keel clearance (“UKC”) policy in order to berth and discharge the cargo. On 27 March 2019, the Master sent the relevant UKC calculations to Northern Marine Management Limited (“NMM”), the Vessel’s technical operator, with a detailed risk assessment. Upon considering the calculations, NMM confirmed on 28 March 2019 that it was prepared to grant an “one off waiver for the NMM UKC policy…on 31 March 2019” to cover both the transit from anchorage and the berthing.

Decision to leave the berth on 31 March 2019

Upon arrival on 31 March 2019, the terminal informed the Master that for the first 7 to 9 hours, unloading would need to take place at a reduced rate of 5,000 barrels per hour. The Master opined that the Vessel needed to maintain a discharge rate of 15,799 barrels per hour to keep a safe UKC, and so he decided to leave the berth and return to the anchorage.

Decision to refuse to berth and commence discharge on 1 April 2019

On 1 April 2019, the Charterer noted that Crown Point was able to discharge the cargo at the rate of 10,000 barrels per hour and requested that the Vessel be permitted to discharge at the next high tide which would be 2100 on 1 April 2019.

The Master contacted NMM with detailed UKC calculations on the basis that the Vessel was all fast at 2100 with no delays, discharge could commence within 3 hours and on the basis that “no allowance for delays, berthing, connections or technical failure ship or terminal”.

However, since the UKC policy is a function of deepest navigational draft which decreased during discharge, the required UKC varied. At 2100, the UKC policy would not be met and so a waiver, permitting the Vessel to berth despite a breach of the UKC policy, would be required. NMM refused to grant the waiver on the reason that there would be “very little margin for safety and ensuring adequate UKC” and if there were any delays and if delays were prolonged, UKC would be “severely compromised, with the risk of the vessel touching bottom”. Therefore, NMM concluded that there were “insufficient controls to mitigate the risks”.

Legal principles

The Court ruled that the terms of the Charterparty underline both the importance of operating the Vessel safely and the importance attached to decisions made by the Master. The Court opined that Clause 3(1) (as highlighted above) sets the tone of the Charterparty by requiring that the Vessel, once loaded, to proceed with “utmost despatch” to the nominated port of discharge and there “always safely afloat” discharge the cargo. Therefore, the Court concluded that the requirement to proceed with “utmost despatch” is not absolute but is tempered by the requirement to remain safely afloat. As to Clause 3(2) (also as highlighted above), the Court opined that it sets out an obligation for the Owner to comply with the Charterer’s voyage instructions, but again, such obligation is not absolute. The Court emphasized that an instruction not considered safe by the Master can be disregarded.

Upon referring to authorities, the Court concluded that a charterer needs to establish some “fault” on the part of the owner or those the owner is responsible for in order to suspend the time for demurrage purposes. However, if the owner acts in a way authorised by the charterparty, the owner would unlikely to be at fault.

Regarding the UKC policy, the Court held that it represented a fetter on the Master’s freedom to decide where the Vessel went and if the UKC was to be breached, the Master needed to consult with the Owner’s agent. In this case, the Court observed that the UKC policy was binding and must not be breached without consent. Careful risk assessment and a UKC calculation before a waiver can be considered underlines the importance of the UKC policy. The Court further noted that as the UKC policy formed an integral part to the Charterparty and was governed by Part 1 of the Charterparty, it would take precedence over the general terms of Part 2.

Upon examining the facts and the experts evidence, the Court concluded that the Master’s request for a waiver on 1 April 2019 was realistic and NMM’s refusal was also entirely appropriate. Therefore, the decision to leave the berth on 31 March 2019 was ruled to be appropriate without putting the Owner in breach of the Charterparty, and time runs against the Charterer. As to the refusal to berth and commence discharge on 1 April 2019, the Court held that the Owner was entitled to reject on safety grounds and there was no fault on the part of the Owner, the Master, nor NMM. Accordingly, the Court allowed the Claim.

Key takeaways

Safety is always the prime consideration. The Court’s decision confirmed that there will be a reluctance to overrule decision made by a Master when making a call over the safety of the vessel so long as the decision was not groundless or unreasonable. Accordingly, an owner may legitimately refuse orders from the charterer when it may jeopardise the safety of a vessel.

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Source: lexlogy

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